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A Skeptic's View of Global Budget Caps


  • James M. Poterba


This brief paper explores the likely effects of government-imposed global budget caps, such as those in the Clinton administration proposal, on health care spending. It argues that health reform proposals that guarantee universal access to a basic package of medical benefits create a substantial new constituency for higher health care outlays. Political and potential legal pressures to expand rather than limit the set of guaranteed benefits, coupled with an expansion of the number of individuals with health insurance coverage, make it unlikely that global budget targets will succeed in reducing the rate of health care spending growth.

Suggested Citation

  • James M. Poterba, 1994. "A Skeptic's View of Global Budget Caps," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 67-73, Summer.
  • Handle: RePEc:aea:jecper:v:8:y:1994:i:3:p:67-73 Note: DOI: 10.1257/jep.8.3.67

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    References listed on IDEAS

    1. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
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    Cited by:

    1. Chang, Ray-E. & Hsieh, Chi-Jeng & Myrtle, Robert C., 2011. "The effect of outpatient dialysis global budget cap on healthcare utilization by end-stage renal disease patients," Social Science & Medicine, Elsevier, vol. 73(1), pages 153-159, July.
    2. Makoto Kakinaka & Ryuta Kato, 2013. "Regulated medical fee schedule of the Japanese health care system," International Journal of Health Economics and Management, Springer, vol. 13(3), pages 301-317, December.

    More about this item

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets


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