Incentives vs. Controls in Health Policy: Broadening the Debate

By Jack A. Meyer; American Enterprise Institute for Public Policy Research | Go to book overview

of their own. Consumers themselves, long accustomed to believe that their interest lies in having the broadest possible entitlement to insured services, are unlikely to be enlightened by the political debate. It is hard to believe that consumers' welfare, particularly their interest in efficiency, is likely to be served, except fortuitously, as decisions on regulation are made through the rough-and-tumble of interest group politics.


Conclusion

The regulation of hospitals is being advocated for a variety of reasons, but the ultimate issues are essentially two. First is the problem of choosing a vehicle for making the myriad difficult benefit-cost trade- offs that must somehow be addressed in providing for health care needs out of society's limited resources. On the one hand, regulation contemplates, if not explicit central decisions on how resources are to be used, at least centrally imposed resource constraints that force providers to ration services. On the other hand, the procompetitive strategy now being given a limited trial contemplates that consumers and their agents, in deciding how much of their resources to dedicate to health care, will impose constraints and cause spending patterns to be shaped according to their preferences.

The second overriding issue is, of course, the choice of a vehicle, either implicit taxation by regulation or explicit taxes and income redistribution, for meeting the health care needs of less fortunate citizens. These basic policy choices obviously depend on difficult empirical and value judgments relating to overriding concerns about equity and efficiency. Attempts to choose between or reconcile these often competing values are, of course, never easy.

Whether regulation or deregulation is the better health policy is an issue that can be and probably will be endlessly debated. Unfortunately, however, continuing the nation's flirtation with cost-containment regulation without final resolution, one way or the other, is not without substantial costs. If, on the one hand, this choice could be resolved so that the likelihood of government regulation was insubstantial, many purchasers of health services would move aggressively to protect themselves against higher costs, and many providers would move to achieve efficiencies and develop organizational arrangements that would position them for success in an increasingly cost-conscious environment. On the other hand, a continuing political prospect that regulation will be introduced encourages the belief that the government is in charge (even if it has not yet acted), discourages private decision makers from investing in innovations that government action

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