|•||• The predominant incentive is to underprovide services.|
|•||• Private health plans must resort to expensive and intrusive microregulation in order to ensure that providers act to control costs.|
|•||• Government must further engage in microregulatory policies to ensure that consumers receive good quality of care.|
The peculiar evolution of the American medical system has resulted in a situation where both businesses and government must engage in expensive and intrusive regulation. Health plans use regulation to ensure that they compete on the basis of cost; government uses regulation to ensure that quality is not compromised through market competition. Short of wholesale reorganization of health care financing so that the underprovision of services is not rewarded, the tensions described here are only likely to escalate.
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