ABSTRACT
The focus for federal health policy redirection is the Carter administration's Hospital Cost Containment Act, introduced in both 1977 and 1979 as the proposed solution to the problem of rapidly rising system costs. An accurate measure of the true rate of hospital price change must allow for expanded quantity and quality of actual services. Economists have attempted in recent years to quantify the breakdown between the two primary components of hospital cost increases: several inflation factors, and increases in the quantity and quality of inputs in the typical bundle of services provided per patient day or per admission. The practical effect of using the "waste substitution" method to achieve compliance with revenue controls is that hospitals will be forced to preside over a shrinking service capability year after year. The implicit purpose of revenue limit programs is to provide the federal government with leverage it can use to affect the management decisions of hospitals.
