The aim of this paper is to demonstrate that the problems which arise from simultaneously developing regulatory and competitive approaches to health care cost containment can be solved, if recognized, and that those problems deserve more systematic investigation than they have so far received. It is suggested that public regulation which accommodates the special characteristics of health maintenance organizations (HMOs) allows for effective competition. Although there are formidable difficulties in formulating the appropriate regulatory strategies, there are some encouraging signs, such as the renewed commitment of the Carter Administration and Congress to the development of HMOs and the active interest of the Federal Trade Commission in health care, that future policy may minimize conflict between regulation and competition.

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