The West German health care system has experienced a serious escalation of expenditures since about 1970. For a variety of reasons, many features of the national health insurance program that might have provided restraints on costs were gradually eliminated. Most notably, some restrictions on the supply of physicians and hospital facilities were ended, as was an earlier system of fixed budgeting for ambulatory care services. In addition, legislative and judicial decisions have continually expanded both the benefits and the standard of care that must be provided to publicly insured patients.

In 1977, the government passed a Health Care Cost Containment Act which ordered several measures to curb costs: prospectively negotiated ceilings on expenditures for physicians' services, dentists' services and prescription drugs; strengthening of utilization review; composition of a unified fee schedule; small increases in cost sharing and limitations on insurance benefits; and some changes in financing. The reform efforts seem to have had a significant effect, though it is still too early to tell exactly what caused the declining growth rate of health expenditures, and whether the new trend will persist.

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