An analysis of structural incentives in the Arizona Health Care Cost-Containment System

This article analyzes the financial structures of the prevailing public and private health insurance mechanisms. Based on this analysis, it was concluded that the financial structures of health insurance mechanisms are deficient in that they neither produce efficiency in the consumption of health services, nor generate efficiency in the production of health services. On the other hand, closed-end systems of finance, such as the health maintenance organization (HMO) or the new Arizona Health Care Cost-Containment System (AHCCCS), give more promise of achieving such efficiencies. The AHCCCS represents an important innovation in the public financing of health care, and, for policy purposes, should be considered a viable national alternative for the reform of Medicare and Medicaid.