Targets and systems of health care cost control

Discussion of health care cost control policy and politics tends to focus o n terms such as "market:' "government:' and "managed care" that are either too general or too value laden to encourage sound analysis. This article pr oposes an alternative framework for classifying cost control policies. It f irst distinguishes targets from systems of control. Targets can then be div ided into categories of service (e.g., hospital care, pharmaceutical treatm ent) and components of cost (e.g., price and volume). Systems can be classi fied in terms of the degree of pooling of finance, ranging from no insuranc e to a single pool of funds, and how payment of providers is organized, ran ging from all payers paying all providers on the same terms to extensive se lective contracting among payers and providers. The article analyzes exampl es of target policy and politics, system policy and politics, and how syste m choices can influence which targets are targeted how well, so as to show that both policy consequences and political alignments become clearer by us ing these terms. As one instance, discussions of "managed care" are often c onfused because the term has two meanings, one referring to target policy a nd one to system policy.