The Counterrevolution in Health Care Financing

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Abstract
The revolution in heath care financing is transforming American medicine. Medicare's prospective payment system based on diagnosis-related groups, the spread of health maintenance and preferred-provider organizations, the increased use of deductibles and co-payments, and a wide variety of statewide cost-containment programs have dramatically altered the incentives and constraints facing physicians and other health care providers.The roots of the revolution, which had been growing for years, included overuse of services resulting from open-ended third-party reimbursement, inadequate evaluation of new technologies, inefficient and inequitable cross-subsidization, and excess supplies of hospital beds and specialists. Radical changes in health care financing and organization . . .

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