Targets and systems of health care cost control

Discussion of health care cost control policy and politics tends to focus on terms such as "market," "government," and "managed care" that are either too general or too value laden to encourage sound analysis. This article proposes an alternative framework for classifying cost control policies. It first distinguishes targets from systems of control. Targets can then be divided into categories of service (e.g., hospital care, pharmaceutical treatment) and components of cost (e.g., price and volume). Systems can be classified in terms of the degree of pooling of finance, ranging from no insurance to a single pool of funds, and how payment of providers is organized, ranging from all payers paying all providers on the same terms to extensive selective contracting among payers and providers. The article analyzes examples of target policy and politics, system policy and politics, and how system choices can influence which targets are targeted how well, so as to show that both policy consequences and political alignments become clearer by using these terms. As one instance, discussions of "managed care" are often confused because the term has two meanings, one referring to target policy and one to system policy.