After nearly seven years of steadily increasing competition and the promotion of market forces in the health care industry, public policy measures designed to curb health care costs are failing. Since 1981, the administration's policymakers in Washington have pursued legislation and regulations to encourage competition in the health care field in order to bring the cost of health care under control. It was thought that the discipline of the marketplace and free market forces would encourage hospitals and physicians to bring their charges in line.
The Medicare program has been radically changed to encourage cost containment. Some of these changes were overdue, but the prospective payment system has produced deleterious effects as well. Cross-subsidization of nonpaying patients by paying patients, once a fundamental principle of the industry, is no longer fashionable or accepted as good business.
Resources are being diverted from expensive inpatient services to less costly ambulatory care settings.