Price Controls: On the One Hand… And on the Other

Controlling health care costs requires that limits be placed either on prices, quantities of services, or both. Prices are measurable and more easily controlled than is quantity and, consequently, health care cost containment has frequently focused on mechanisms for controlling prices. Regulatory approaches, however, may create market distortions and change access patterns. An alternative approach to controlling prices is to restructure the market for health services to encourage greater price competition among providers. Because this type of health reform has not previously been attempted, there is much more uncertainty about the outcome of market-oriented approaches than for direct regulatory control over prices.