ABSTRACT
Throughout the 1980s, many OECD countries sought to control increasing expenditures on health by limiting the total amount of resources available to their respective health care systems. In single-payer systems this was achieved by capping government expenditures, by changing the method of payment to hospitals from reimbursing for all costs incurred to a prospective annual budget (thus devolving to hospitals a measure of budgetary responsibility), and by reducing the number of hospitals and hospital beds and the numbers of health care providers. This macro cost-containment approach is grounded in the
economic intuition that expenditures on health care services equate with incomes for health care providers. Health care providers have an incentive to lobby for an ever-increasing amount of resources to be devoted to the health sector, regardless of real need. This self-interested behavior is often disguised in the rhetoric of an increasing societal need for health care services or the threat of declining quality of services. Thus, the theory runs, because of the large inefficiencies within most health care systems, government can cap or cut the amount of resources devoted to the system without detrimentally affecting “health” and physicians and other providers will of necessity increasingly select the most cost-effective services and prioritize health care needs.
