ABSTRACT
Healthcare costs received attention from President Richard Nixon during the period of wage and price controls. Predictions of Medicare’s “bankruptcy” also began to surface. Worry over costs in the 1970s spurred a number of cost-containment efforts. This chapter assesses major cost-containment efforts that have been directed at the provider level, especially with regard to hospitals and physician services. Like the growth in aggregate healthcare spending, Medicare expenditures reflect both price inflation and increases in the use of services. Hospital expenditures led the way in the 1970s, and physician spending took off in the 1980s. In 1974 and 1975, Hospital Insurance payments grew at rates in excess of 20 percent, prompting the administration of Jimmy Carter to propose national hospital rate setting. The basic justification for Prospective Payment System was a desire to stop paying hospitals on the basis of costs already incurred.
