Containing health costs

Co-payments amounting to an average 40% of expenditures in Korea have done little to slow the rate of increase in health spending, which grew from 3.7 to 6.6% of GNP during the 1980s. Similarly the practice, introduced by private USA insurers, of retrospective reviews of utilization of medical care appears to lead to a modest one-time savings in health spending but does not appear to have long-lasting effects on the rate of growth of expenditures.

By contrast, pre-payment of health care providers is a promising approach to containing health expenditures. Governments could promote such schemes by removing legal barriers that in many countries prevent the same institution from acting as both insurer and provider. In South Africa the government decided to allow the creation of health maintenance organizations (HMOs), mainly as a way of containing health costs. More than twenty such organizations were established in just a few years. they introduced capitation and negotiated fees, which limit costs more effectively than did the open-ended fee-for-service payment arrangements historically used in South Africa.