a reasonable cost," by reconstituting the nation's
This climate is
anemic network of state and local health planning
agencies.
Now, four years later, that network is largely
in place. Yet in those few years since its inception,
the political and economic environment has
changed dramatically, placing new demands on
the nation's health planning effort that it is
ill-designed to meet. Foremost among these is
the pressure to control spiralling health care
costs-now the dominant theme of federal health
policy.
The following article chronicles those growing
cost control pressures, examines the ways in which
the nation's health planning network has been,
in part intentionally, ill-equipped for this respons-
ibility, and discusses its likely impact on the future
shape of health planning.
A Legislative Preview
Congress offered a preview of mounting cost
control, anti-regulatory and special interest forces
when the original authorization for PL93-641
expired last year. The attempt to renew this
authorization and to strengthen the law resulted
in a legislative standoff. Congress finally passed
a one-year continuing resolution to maintain
PL93-641 and fund it as before, postponing until
this year resolution of the conflict among these
contending forces.
The most powerful of these forces is the pres-
sure to control rising health care costs. National
health expenditures have risen inexorably, reach-
ing a total of $163 billion last year, or $737 per
capita. A recent HEW study predicts that the
tab will reach $1 trillion by the year 2000, con-
suming over 12 percent of the GNP. The largest
and most rapidly rising portion of these are
hospital costs, fueled by the generous reimburse-
ment policies of Medicare and Medicaid which
now pay over half of all the nation's hospital
costs.
The pressure to control these costs is intense,
stemming not only from internal budget impera-
tives, but from such external sources as business
and labor as well. Meanwhile, hospital cost control
legislation-centerpiece of Carter health care pol-
icy-is sitting stalled in Congress for the second
year in a row.
Growing cost control pressures coincide, more-
over, * with an increasingly conservative political
2 climate ushered in by the passage last year of
Proposition 13 in California.
marked by concern for a balanced budget and re-
duced social spending, a desire to turn back the
The cost of health care is expected
to reach $1 trillion by the year
2000, consuming over 12 percent
of the Gross National Product. Mean-
while, hospital cost control legisla-
tion is sitting stalled in Congress for
the second year in a row
regulatory role of government, and a penchant,
unfortunately missing in more expansive times,
to examine carefully the effectiveness of tax-sup-
ported programs. The result is intense pressure
on existing health agencies, particularly regul-
atory ones, to show their effectiveness, and there
can be no doubt in this case about the definition
of effectiveness: it is cost control. Evidences of
this pressure abound:
Early last year the Administration abruptly
announced plans to abolish the Professional Stand-
ards Review Organization (PSRO) program be-
cause it had proven ineffective in regulating costs.
This, in spite of the fact that PSROs were osten-
sibly created to assure the quality and approp-
riateness of health care services, not to control
costs. Following expressions of shock, the Admini-
stration retreated to the position that PSROs
must, for the coming year, demonstrate cost
savings at least equivalent to their program costs.
Then, in the fall, HEW Secretary Joseph Cali-
fano summarily fired Robert Derzon, head of
HEW's Health Care Financing Administration
(HCFA), for proceeding too slowly with Medi-
care-Medicaid reform.
HEW's cost control concerns were further mani-
fest by the issuance in August of the National
Standards for Health Planning, a major policy e-
dict to the nation's health planning agencies. These
standards, which address the minimum size, utili-
zation and need for health facilities, are intended
to constitute the basis upon which to begin shrink-
ing the health system. HSAs must now apply these
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