Competition and health cost containment: cautions and conjectures

Market approaches based on reformed incentives and newly vigorous competition are increasingly proposed as reliable, preferable alternatives to public regulation in the quest for health care cost containment. Health maintenance organizations (HMOs) are often said to provide both theoretical and empirical support for market approaches and are expected to be important vehicles for the exercise of market forces in a "reformed" health care system. Yet experience in the 1970s with federal efforts to increase the number and enrollment of HMOs suggests that serious problems of organization, expectations, and political interest will arise even in a reformed marketplace.