What do we know about rate-setting?

Abstract

State regulation of hospital revenue is one approach to cost containment on which there is voluminous evaluative data from the "laboratory of the states"; yet these data are sufficiently complex and ambiguous that they are claimed by both proponents and opponents of rate-setting as support for their respective cases. This paper summarizes the evidence, concluding that mandatory rate-setting has generally constrained hospital costs where it has been implemented. However, were rate-setting established in additional states, it is not clear that comparable results would be realized. It is still less clear that rate-setting would constrain health care costs more than would increased competition and selective contracting.