Rapid medical care cost growth is one of the primary economic and fiscal challenges that policy makers wrestle with in the United States. Nationwide, medical expenses have grown at a rate approximately double the rate of inflation over the past two decades, in part due to price increases, in part due to quantity increases, and in part due to the introduction of new medical technologies. Medical care expenses have risen to approximately 20 percent of gross domestic product as of 2012, and it is projected that these expenses will cripple the state and federal budgets and slow economic growth in other sectors in the years to come.

Accountable care organizations (ACOs) and insurer formation of narrow provider networks are two oft-discussed policies to reduce costs, with both having been implemented to some degree in practice. Participation in ACOs allows medical providers to...

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