The Rise in Medical Expenditures (6)

What events occurred during the 1980s in both the public and private sectors to make the delivery of medical services price competitive?

The HMO Act of 1974 legitimized HMOs; the lifting of restrictive federal qualifications in the 1980s allowed HMOs to flourish.  Meanwhile, federal subsidies to medical schools increased the supply of physicians and exerted downward pressure on prices. The introduction of DRG payments incented hospitals to reduce length of stay and to monitor physician practices that increased costs.

Meanwhile, as the United States emerged from a recession, businesses eager to continue their recovery pressured insurers to better control the cost and use of services. Other practices, such as increased deductibles and copayments, prior authorization and length-of-stay reviews, and application of antitrust laws also contributed to a reduction of prices.