COST CONTAINMENT AND NEW PRIORITIES IN THE EUROPEAN COMMUNITY

This article reports on the author's survey of the cost-control measures for health care in 12 European countries during the period from 1983 to 1990, Among these countries the greatest convergence was in the use of the budget as a system of control, reinforced by manpower controls. Budgets were constructed to restrict hospital costs and payments to doctors practicing outside of hospitals. Another strategy was cost sharing for purchase of drugs and, in some cases, for dentistry. Most countries took steps to control expensive medical equipment; others, to restrict entry to medical schools. The European experience demonstrates the technical feasibility of the government's controlling health care costs by regulating supply rather than demand. The key to Europe's success is the use of monopsony power, whereby one purchaser dominates the market. The author contends that regulation works in Europe and questions whether the United States can exert similar control over its coalition of insurers and providers in order to rein in its health care expenses.