lead to the rationing of health care, which was deemed unacceptable on its face.

Under the second approach, budget-driven health care delivery, society establishes some sort of prospective budget for health care and tells providers to do the best they can with that budget. Typically, the establishment of the overall budget has been rather arbitrary in practice, in the sense that the budget is tied to some arbitrary criterion such as a fixed percentage of the gross national product (GNP) or a fixed annual growth rate. Ideally, of course, this approach should lead the budgeteers to explore what additional benefits might be had by incremental expansions of the budget and to set the ultimate budget limits in that way. In any event, however, the application of new medical technologies in this world will typically be subjected to rigorous cost-benefit analysis before payment for such technologies will be made out of the fixed budget. Merely demonstrating promised benefits is no longer sufficient and will not be accepted by those who would stand to lose from applications of novel technology within the given budget constraints.

During the first two decades following World War II, when the industrialized world experienced rapid economic growth, many nations were willing to adopt expenditure-driven financing of health care. That policy was most exuberantly pursued by the former West Germany, whose health spending until 1975 rose faster than that of any other industrialized country. Since the mid-1970s, however, most of the industrialized world has attempted to shift toward budget-driven health care delivery, with varying degrees of success. Some countries, notably England and Sweden, had already adopted top-down budgeting before the mid-1970s. Even the conservative, market-prone government of Helmut Kohl of Germany introduced in December 1992 a new health reform law that provides for strict, global, top-down budgeting of all sectors of the health system effective January 1, 1993.

In this respect, the United States remains the odd one out, because it is only just thinking about moving in that direction. For the most part, both the government and private-sector payers in the United States are able to figure out what they have spent on health care in any given year only with a lag of a year or so. In fact, the announcement of total national health spending in recent years has lagged actual spending by close to 2 years. That announcement is eagerly anticipated by all concerned, and the actual numbers always come as a complete surprise (and, typically, as a complete shock as well). In 1993, for example, health spending may well climb to 14 percent of the gross domestic product. A forecast published by the Congressional Budget Office of the U.S. Congress predicted a ratio of 18 percent by the year 2000.

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