The introduction of DRGs for financing health care is dramatically changing the system of delivery and provision in the U.S. To understand the consequences, it is important to focus not only on cost-containment issues but also on new institutional mechanisms fashioned to reshape health care delivery and provision. A realignment among the major actors is occurring, with the state adopting a central role in redefining its own function in the health care system, constructing a new framework and agenda for change, and enlisting the participation of other social actors in implementing change. The specific features of this realignment are analyzed in the context of mental health DRGs. This article concludes that, based on the consequences of DRGs to date, we ought to look beyond present indicators of retrenchment in the health care system to how the unique features of the American welfare state are continuing to evolve.

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