Competition and prospective payment: a new way to control health costs

Health care costs must be controlled to finance the expanded eligibility and coverage promised during the Presidential campaign. As a practical reality, reforming the existing fee-for-service system is the only way that significant cost control can be achieved during the next four years. The expansion of the basic Medicare prospective payment system to all health care settings and to all payers, combined with price discounting and consumer incentives to use providers that discount, can form the basis of a competitive prospective payment system (PPS). A competitive PPS can bring down costs and complement managed competition and other ongoing cost-containment initiatives.