COST-CONTAINMENT IN US HEALTH-CARE

The author explains why supply factors, particularly the overdevelopment of the nation's medical capacity, are more important than demand factors in explaining the high use and cost of U.S. health care. Yet such costly care often does not translate into better health for Americans. While market forces, especially the efficiencies fostered by managed care, may clear some of the excess acute-care capacity and foster the use of less-costly generalist physicians, such forces favor the strong over the weak. This makes vulnerable those persons without health insurance or on Medicaid only, inner-city and rural hospitals, and academic medical centers. And when health care is treated as a market product, the relationship between doctors and patients is endangered. The author urges that the effects of managed care be watched, particularly for possible neglect of the underserved and for diminished employment opportunities for all health professionals, especially nurses and certain specialists. He thinks it is likely that much of the savings that market forces will create will not stay in the health care sector (where they could be used to expand services for the uninsured, for example) but will go into the business side of health care (e.g., to pay shareholders' dividends). And he stresses that issues of adverse selection, risk adjustment, and outcomes measurement will have increasing importance to persons with chronic illnesses, who may be neglected. The nation's rising expenditures for health in conjunction with its aversion to raising taxes or increasing the deficit means that the challenges to contain health care costs and to prevent the widening of the gap between the more and less fortunate will remain.