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Perspectives on government policy in the health sector.

Health expenditures and prices have accelerated markedly in recent years, both in absolute and relative terms. The pressures for some form of governmental intervention have generated widespread debate about national health policy. Determinants of health are complex, and policy development must follow the identification of issues and review of theoretical policy analysis. Formation of a theoretical basis will have a significant impact on substantive policy outcomes. Unfortunately, past and current proposals and policies have given insufficient attention to the traditional public finance criteria for government intervention; as a result, the importance of market forces has frequently been overlooked. Before wholesale rejection of the market as a means of promoting rationality, government should examine alternatives that foster increased efectiveness of the market mechanism. Even within this context, however, some forms of regulation will be necessary; also, traditional public finance norms would allow certain kinds of expanded government intervention. Market-perfecting policy instruments would result in different kinds of government programs, and much of future policy will be shaped by political decisions about substantive health policy issues.