ABSTRACT
This chapter discusses and analyzes specific regulatory mechanisms introduced into the health care economy. It demonstrates that conventional economic tools can play a powerful role in explaining how health care markets work. The controls on quantity tend to be indirect rather than direct, with the most prominent example being Certificate-of-Need (CON) laws. The 1965 enactment of Medicare and Medicaid brought the federal government into the reimbursement of services. Medicare's Prospective Payment System (PPS) has reduced length of stay in hospitals subject to the regulation but has not led to reduced quality of care or access to care. The Antitrust Division of the Department of Justice (DOJ), formed in 1903, alone has the power to seek criminal charges. The second agency, the Federal Trade Commission (FTC), is an independent agency with exclusive jurisdiction over the FTC Act. Relative value scales (RVSs) were developed by state medical societies and other organizations.
