Payment reform in the United States

Concern over rising health care costs has prompted dramatic reform in the United States health care financing system. The United States is moving from a period where providers determined prices into a period where payors set prices; and in certain locations into a period where prices are set by providers, and consumers choose among providers based on price and other factors. Also presented is an analysis of the interrelated events that brought about the changes. Among the factors are the oversupply of physicians and other providers the improvement of case-mix measures and other measures of hospital output, and the political climate toward payment reform. The paper concludes with specific lessons for other countries.