Prospective payment promises improvement for a health care system plagued by inefficiency and rising costs, but is likely to disappoint. Serious efforts to control costs threaten the system's access and quality objectives and will be resisted. Moreover, serious cost containment, whether the result of all-payer regulation or competition, requires a stronger civil service than America seems capable of providing. A comparison with the experience in defense demonstrates the important limitations in applying incentive-based models in policy areas with conflicting goals. The search for panaceas will go on, but there are none.

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