Strategies for implementing global budgets.

Abstract

Implementing global budgets requires setting a desired level of spending as well as establishing a set of policies to assure the budget will be met. Four alternative approaches are analyzed: one relies on all-payer rate setting coupled with volume controls; the second is a system of premium regulation that controls both the levels and rates of insurance premium increase; in another system, price competition among insuring organizations limits growth in spending while incorporating a global budget that limits the aggregate costs of all premiums; finally, either managed competition or premium regulation is combined with all-payer rate setting. The fourth model is singled out for its ability to control costs. An independent policy toward capital expenditures could increase the likelihood of success under any of the strategies.