Health Policy 120 (2016) 486–494

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Health Policy

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Review

Policy options to contain healthcare costs: a review andclassification

Niek Stadhoudersa, Xander Koolmanb, Marit Tankea, Hans Maarsec,Patrick Jeurissena,∗

a Celsus, Academy for sustainable Healthcare, IQ Healthcare, Radboud University and Medical Center, P.O. Box 9101,114 6500 HB Nijmegen, The Netherlandsb Talma Institute, Health Sciences, VU Amsterdam, De Boelelaan 1081, 1081 HV Amsterdam, The Netherlandsc School for Public Health and Primary Care (Caphri) of the Faculty of Health, Medicine and Life Sciences,Department of Health Services Research, Maastricht University, P.O. Box 616, 6200 MD Maastricht, The Netherlands

a r t i c l e i n f o

Article history:Received 26 November 2015Received in revised form 24 February 2016Accepted 10 March 2016

Keywords:Cost containmentConceptual frameworkLiterature reviewPolicy evaluationHealth system convergence

a b s t r a c t

Containing health care costs has been a challenge for most OECD member states. We classify2250 cost containment policies in forty-one groups of policy options. This conceptual frame-work might act as a toolkit for policymakers that seek to develop strategies for cost control;and for researchers that seek to evaluate them. We found that certain important cost driverssuch as wages and capital are being sparsely covered. We distinguish four primary targetsto contain costs: volume controls, price controls, budgeting and market oriented policies.Price controls and budgeting, both seen as relatively effective, appear substantially lessoften in literature than volume controls and market oriented policies. The relative use ofeach option hardly changed over time, although the health system type did matter. Mar-ket oriented policies were more likely to be suggested for countries with public provisionof health care, as well as for the US system. In contrast, budgeting policy proposals were

more likely to be suggested for countries with market provision systems, such as Canada,Germany and France. Implementation of cost containment policies could lead to conver-gence of health care systems, except for the US system, if policies are implemented basedon the literature.

© 2016 Elsevier Ireland Ltd. All rights reserved.

1. Introduction

Health costs tend to grow faster than the economy,leading to concerns about the sustainability of health careexpenditures [1]. High growth is not necessarily a causefor concern, since good health is highly valued [2]. Also,

new health technologies may prove to be value for money[3,4]. However, the level of health care spending mightbe inefficiently high in most countries [5–8]. The US, for

∗ Corresponding author.E-mail address: pp.jeurissen@minvws.nl (P. Jeurissen).

http://dx.doi.org/10.1016/j.healthpol.2016.03.0070168-8510/© 2016 Elsevier Ireland Ltd. All rights reserved.

example, has the highest level of health expenditures of allcountries, but on average performs rather poorly on healthoutcomes [9,10]. Some studies suggest that the level ofhealth spending does not fully account for differences inhealth outcomes among OECD countries, suggesting sub-stantial room to improve value for money [11,12].

More importantly, the rise in health care costs mightincreasingly threaten the sustainability of governmentexpenditures [13]. OECD governments spend between 19%

and 45% of total public spending on health care in 2011[14]. As health care is a substantial spending post for gov-ernments, increases in total health care expenditures couldrisk for government budget excesses. These can be resolved

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y containing health costs, increasing taxation (or socialontributions) or cutting spending on other governmenttems such as education or infrastructure [15–19]. Increas-ng debt levels could provide short term relief, but are notustainable as a permanent solution to health cost growth20].

As a result of the global financial crisis, governmentsncreasingly took austerity measures to lower publicpending on health care [21–23]. Although health costrowth has slowed down since the crisis, in part becausef cost containment policies, growth can pick up again ashe economy improves [24,25]. Also, new and expensiveechnologies entering the market might increase expendi-ures [26,27]. As health costs are projected to continue toutpace economic growth, cost containment likely remains

pressing issue [24,28]. Thus, targeted cost containmenttrategies that could lower spending without adverselyffecting health outcomes are increasingly sought for. Onhe other hand, many cost containment strategies hold theisk to turn into policies of cost-shifting, sometimes withdverse health outcomes.

Studies about cost containment policies are accumulat-ng, providing opportunities to learn from other countries’xperiences [24,29]. To categorize the existing knowl-dge a comprehensive cost containment model is required30]. Some proposals for categorization were based onhe distinction between supply and demand [9,20], some-imes added by additional layers that seek to catch thenstitutional dimension of healthcare, such as ‘public

anagement, coordination and financing’ [22]. Joumardt al. distinguish market based policies from commandnd control policies in an effort to assess health sys-em efficiencies [7]. In an important article that evaluateshe interplay between health systems characteristics andommon cost containment policies, White introduced aistinction between ‘targets’ and ‘systems’ of cost con-rol, whereby ‘targets’ mainly refer to policies affectingither prices or volumes; and ‘systems’ to the dimensionsf the health system necessary for effective cost contain-ent [29]. However, such categorizations do not intend to

e comprehensive, and moreover only evaluate a subset ofost containment policies.

The aim of this article is to construct a conceptualodel to study cost containment policies and interven-

ions, grounded in the relevant literature and includingess common as well as more standard policies. We thinkhat such a model can inform policymakers about possi-le cost containment directions. Moreover, it may serve totructure research on the effectiveness of specific groupsf containment policies. We focus on the government goalf containment of the public part of health expenditure,mplicitly aligning with most papers about cost contain-

ent. We use a broad scoping review and a perspectivehat aligns with the aim of containing costs on a system-ide level and include policies described for governments

n all 34 OECD member states. Section 2 presents our con-eptual framework. Section 3 describes our methodology

o collect and categorizes cost containment policies fromhe literature to complete our model. Section 4 describesur results. Section 5 concludes with a discussion of ouresults and policy implications.

icy 120 (2016) 486–494 487

2. The framework

We start by using the accounting identity expressingtotal costs as a combination of volumes and prices. Policiesto contain total health care costs can directly target priceor volume or alternatively, their interplay [31]. Next todirect price and volume controls we distinguish two typesof policies that target both volumes and prices: budgets andmarket oriented policies. A budget forces containment ofprices and/or volumes. Governments can use a market ori-ented approach to increase efficiency and ultimately lowertotal costs. Market oriented policies refer to policies influ-encing market processes and market players rather thanpolicies that stimulate ‘free markets’ or competition. Mar-ket oriented policies could very well add restrictions to‘free’ markets. Therefore, these policies are not exclusiveto market-based systems [32].

The effects of different types of cost containment poli-cies in terms of volumes and prices depend on a numberof factors, such as the reimbursement model, the cost-structure (e.g. level of marginal costs), or the services mix.For example, lower reimbursement prices could inducehigher volumes as physicians try to compensate incomelosses [33]. A decrease in the price of inpatient care mightlead to increases of both prices and volumes for outpatientcare [34]. Restricting the number of physicians might lowerthe number of treatments, but also can lead to scarcity withupward pressures on treatment prices [33]. Services withhigh marginal costs might be more responsive to cost con-tainment policies than those with high fixed costs [22].Also, cost containment of public expenditures could leadto increased private expenditures, i.e. cost shifting. How-ever, assessing the effects of cost containment policies isbeyond the scope of this paper. We base our framework onpolicy targets rather than outcomes in terms of prices andvolumes, as targets may be more invariant.

In this framework we therefore identify four primarytargets for cost containment: (1) direct price controls, (2)direct volume controls, (3) budgeting and (4) market ori-ented policies. We hypothesize that all cost containmentpolicies can be classified to one of these four categories.These four main categories can be further specified usingsecond-level concepts.

Governments can control prices by targeting reimburse-ment prices or production costs. Reimbursement prices canbe contained by rate-setting on health services. Productioncosts include costs of inputs as well as the costs of cap-ital and labor [35]. As total health costs are the productof capital and labor inputs at a fixed level of technol-ogy, input factor prices are considered important targetsfor cost containment. Reimbursement prices can differfrom production costs, the difference being provider pro-fits. Therefore, the effect of policies targeting containmentof production costs is likely to be larger in public pro-vision systems and highly competitive systems, as lowerproduction costs are more likely to translate into lowerreimbursements. Conversely, in market oriented systems

with weak competition lower production costs may merelyresult in higher provider profits.

Policies aimed to control volumes target the numberof services providers might be able to provide (supplier

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side volume controls); or control the number of treatmentspatients are willing or able to consume (demand side vol-ume controls). Further, budgets can be determined for aspecific part of the healthcare system (sectoral budget)or a bundle of different sectors (macro budgets). We usethe Structure-Conduct-Performance (SCP-)framework tocategorize market oriented policies [36]. Market structureinfluences the market conduct in terms of competition orcollaboration, which then channels actual market perfor-mance. Policies can target each stage of the framework toobtain a lower-cost outcome.

3. Materials and methods

Appendix 1 graphically summarizes our methodologyand our research strategy. Since the aim is to provide abroad overview of the field of cost containment policies,we performed a scoping review [37,38]. We restricted ourmethodology to articles in the English language. Our reviewfocused on policies enacted at the regional or country level[12,29]. To retain a broad scope, a policy was included ifthe article states that it may contain costs. This may besector costs, public costs or total health costs. Possibly ourreview includes policies which a paper claims to be ableto contain costs, but which turn out to be ineffective. Forexample, policies may simply shift cost to patients with-out affecting the total cost level [39]. However, evaluatingeffectiveness of cost containment policies is beyond thescope of this paper. Policies may have other aims besidescost containment, such as increasing quality or equity. Weincluded policies if the article states that the aim of a policyis, amongst other aims, cost containment.

We identified the following keywords, in various combi-nations using Boolean operators and glossary terms whenappropriate: Sector: healthcare, health care, long termcare; action: lower, control, contain, decrease; object:expenditures, cost; Actor: government, policy. The fol-lowing online literature databases were used: Pubmed,Embase, CINAHL, Econlit, Web of science, Business SourceComplete, Sage Research Methods, IDEAS.

Using these keywords, we found 8134 articles. Weimported these articles in Endnote X7 and scanned eachon title and abstract. Duplicates were removed using End-note’s ‘Remove Duplicates’ function. If the possibility ofinclusion could not be determined by title and abstract,the full text was examined. Finally, 710 articles met allof our inclusion criteria of which the following informa-tion was extracted: year of publication, authors, journal,title, the country or countries the article refers to, region,state or province the article refers to (if relevant), spe-cific health sector, as well as all cost containment policiesmentioned.

Two reviewers categorized the cost containment poli-cies from the literature into one main category and onesecondary category. For each policy, first we determinedwhether it targets total costs (budgeting) or not. If the pol-icy could not be considered a budget, we assessed if the

policy directly targets prices, by setting the reimburse-ment price or by targeting production costs. For example,introducing DRG’s (payment reform) does not set prices ofDRG, but introduces a mechanism that could lead to more

icy 120 (2016) 486–494

efficient provision. Therefore, it was categorized as a policytargeting efficiency improvements via market processes.However, a policy setting DRG prices was consideredas rate-setting, and was categorized as a price targetingpolicy.

Similarly, we assessed whether a policy directly targetsvolume, by reducing patient demand or by provider restric-tions. For example, cost sharing targets patient overuse ofcare rather than a lower reimbursement price, and wastherefore considered a policy primarily targeting lowervolumes [39]. Policies stimulating moving from an inpa-tient setting to an outpatient setting do not mainly aimto restrict treatment volumes, but rather promote a moreefficient setting for treatments, and were therefore catego-rized as policies changing market structure to obtain costcontainment. Finally, policies can promote a more efficient,lower cost outcome by influencing market processes. Theseinclude policies targeting market structure, like mergercontrols or changing types of third party payers, but alsopolicies targeting to reduce inefficiencies in the overallperformance of the health system, such as administrativeexcesses or tort reform.

Cost containment policies could be part of policy bun-dles, such as the Choosing Wisely campaign [40]. Thecost containment aspects of these policy bundles wereevaluated separately. For example, the notion of patient-centered care can include a number of policies whichmay lower costs, e.g. shared decision making, enhanc-ing patient choice in providers, increasing possibilities tochoose insurance and reducing practice variation to reduceovertreatment [41]. Separate policies within a bundle hav-ing different targets may be categorized at different placesin our framework.

Next, we created a third layer of categories to furtherspecify our findings. This categorization was based on sim-ilarity between the founded policies (inductive approach)[42]. Groups were given a term that covers the underly-ing policies. If any intervention did not fit into any existinggroup, a new group was created until all cost containmentoptions were assigned to one single group. The secondreviewer repeated this procedure to test the robustness ofthe categorization.

We validated the saturation of the model using twoexternal sources. Berenson et al. present a completeoverview of 36 cost containment policies that were imple-mented in US Medicare between 1970 and 2008 [43]. TheNetherlands Bureau for Economic Policy Analysis (CPB)evaluates electoral plans of Dutch political parties ontheir budgetary effects. In 2015, CPB evaluated 104 pol-icy propositions from ten different parties [44], providingan overview of cost containment policies that covers theentire spectrum of political ideologies. Two researchersindependently categorized the cost containment optionsfrom these two sources [45].

4. Results

We were able to extract a total of 2250 studied cost con-tainment policies from our database of 710 articles. Themajority of articles was published in 1994 (Fig. 1). The USis the largest contributor with 52% of all policy options,

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ig. 1. Number of cost containment policy publications over the years 19o September) (left axis) related to weighted OECD-average health costs

er country is used as weight factor.

ollowed by Canada (9%) and Germany (7%). We found arti-les for 28 of 34 OECD countries. The majority of articlesas published in Health Affairs (76), Health Policy (38)

nd the New England Journal of Medicine (18). 153 articlesxplicitly covered a health subsector, specifically pharmacy37%), long-term care and mental care (28%), hospital care25%) and primary care/prevention (10%).

All 2250 cost containment policy options were placednto one of the four target categories of the conceptualramework with an inter-rater reliability of 83%. Disagree-

ents were discussed and re-categorized. Fig. 2 shows

ig. 2. Conceptual cost containment framework showing categorization of 2250ight articles did not furter specify price controls (2), volume controls (2) or mararget.

5 (for 2015 the total number of articles is estimated based on articles upntage of GDP (right axis). The fraction of total cost containment policies

that most policies found in the literature are market ori-ented policies (44%), followed by volume controls (34%),price controls (15%) and budgeting (7%). Following ourinductive approach, 39 third-level categories were defined(inter-rater reliability 76%). The remaining 24% was re-categorized based on common consent, which requiredminor changes in category definitions (see Appendix 2).

Some cost containment policies were found to be usedin different settings and for different targets. For exam-ple, technology assessment is stated as a tool to define thebenefit package, to prevent overtreatment, to establish a

cost containment policies into four primary targets and 41 sub-groups.ket oriented policies (4) and were only categorized according to primary

490 N. Stadhouders et al. / Health Policy 120 (2016) 486–494

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Fig. 3. The moving 5-year average trends of relative coverage in literatucountries excluding the US.

reference price and to improve transparency. These toolsfor cost containment were categorized based on their spe-cific target as stated in the article.

Confrontation of our model with real world cost con-tainment policies did not result in alteration of the model.Of the 36 implemented policies in Medicare, 32 were liter-ally present in our database, and for 4 policies similar termswere found. Of 104 real life propositions made by Dutchpolitical parties, 37 were featured literally in the reviewdatabase; while similar terms could be found for another52 policies. Sixteen policies did not have a counterpart inthe literature, but could be categorized using the existingcategories from the framework. The validation did not leadto revision of the framework.

Fig. 2 suggests that the toolkit of policymakers tolimit spending growth contains up to forty-one explicitstrategies. This figure also illustrates that some of the pri-mary strategies that are considered comparatively moreeffective, such as budgeting and price controls [46], arecovered less intensively in the literature. The structureof the third party payer market has been proposed andstudied the most among our database (185), followed bypayment reforms (174) altering the method of reimburse-ment (e.g. DRG’s, capitation, pay-for-performance), cost

sharing mechanisms (160), and policies aiming to increaseappropriateness through utilization review, guidelines andreduction of regional variation (148). Some categories suchas patient choice of providers (3), cost reducing innovations

imary cost containment targets in (a) all OECD countries and (b) OECD

(6), and the reduction of fraud (8) and waste (9) have beenhardly mentioned or studied. We conclude the same forimportant underlying cost drivers such as wages (21) andcapital (11). Demand policies make up 17% of all cost con-tainment policy proposals (387 of 2250). Demand policiesinitially comprised 10% of all policies during the 1980s,increased to 20% in the early nineties and stabilized after-wards (data not shown). Strategies with more inconclusiveoutcomes on cost containment seem to have been coveredthe most, perhaps suggesting that searching for efficiencydominates pure cost control.

After relative stability we see an increase around 2008 inthe literature that tracks market oriented cost containment(Fig. 3a). As over half the articles are US-oriented and theUS may be considered an outlier healthcare system [47], wealso show the relative quote of cost containment targets forOECD countries excluding the US (Fig. 3b). When excludingthe US, market oriented policies decrease to about 25–30%of all policies. In OECD countries other than the US, studieson volume controls are predominant at about 40%. Budget-ing peaked in popularity in the early 90s with 20% of allpolicies, but then leveled off to about 10%. Budgeting andprice controls also plateau at somewhat higher levels thanthe articles that cover these issues for the US.

Fig. 4 plots some trends in individual cost containmentpolicies that have been studied most. Across market ori-ented policies third party payer structure tops during thelate nineteen nineties, before entering into a steep decline.

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ig. 4. The moving 5 year average trends of highly covered containmenttrategies.

his seems to correspond with the rise and fall of man-ged care practices in the US. Recently, many studies coverayment reform illustrating the search toward new reim-ursement mechanisms that include elements of qualitynd outcome schemes (Fig. 4a). We witness a decliningumber of studies into capacity regulations and benefitsFig. 4b).

We categorized health systems as public provision orarket-based provision systems based on the classification

f Joumard [48], as the study classifies most OECD memberountries into two equal-sized groups. The US was con-idered as a third type of system characterized by a highevel of private insurance [47]. Using this classification, weound that countries relying on market based provisionttracted more policy suggestions for cost containmenthan public provision countries (Table 1 in Appendix 3).xcluding the US, policy options in market based provisionountries were covered three times as often in absoluteerms compared to public provision countries. Interest-ngly, budgeting and pricing options are covered somewhat

ore for market provision systems in comparison withublic types; while, in relative terms, market orientedolicies and volume controls are covered more often forublic provision systems. This might indicate that the lit-

rature holds a tendency to cover options that might fitetter into alternative healthcare systems. The US tops allther countries with a very strong interest in the literatureoward market oriented cost containment policies.

ies in the literature: (a) market oriented policies and (b) volume control

To check the robustness of the classification, two otherclassifications were used. Docteur and Oxley [49] differfrom Joumard primarily in the classification of Australia,the UK and New Zealand. Table 4 in Appendix 3 showsthat countries such as Canada, Germany, the Netherlands,France, Japan and Australia have fewer market orientedpolicies (25–30% of total) compared to the UK, Sweden andNew Zealand (39–50% of total). Thus, our results are some-what sensitive to the grouping of the UK and New-Zealandwith regard to market oriented policies. For most countriestoo few articles were found for each policy classification tobe robust.

5. Discussion

A full overview of cost containment policies holds thepromise to form a powerful checklist, which helps pol-icymakers to better structure their policies as well asdiscovering alternative options. This contributes to the artand craft of both policy learning and policy analysis. Sincefiscal stress often induces reactive policymaking basedon countries’ institutional legacies, a structural assess-ment of policy options might add to the policymakers’toolkit.

In this article, we set out to construct a conceptualcost containment framework. To this aim, we constructeda theoretical framework distinguishing four primary tar-gets for controlling health costs: (1) price controls, (2)

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volume controls, (3) budgets, and (4) market oriented poli-cies. By collecting 710 articles that describe a total of 2250cost containment options, we were able to further specifyour model into 41 separate categories of cost containmentpolicies. Our review allows identification of trends in costcontainment policy literature.

In his 2002 paper, David Cutler discerns three univer-sal waves of health reform in OECD-countries [50]. Thefirst wave of reform provided equal access and univer-sal coverage (about 1940–1970). This spurred large costincreases, leading to a wave of cost containment reforms(1970–2000). In order to increase efficiency, a third wave ofmarket based reforms was initiated in the 2000s. Therefore,we expected to find that literature about cost containmentwould increase up to 2000, after which attention wouldshift toward market oriented policies.

Our data partly supports this theory. First of all, thenumber of cost containment articles shows two peaks.The first peak could reflect increased concerns about costcontainment in the early and mid-1990s, consistent withthe second wave of health reform, while the second peakmight relate to the global recession of 2008 [51]. However,given that over half of the articles consider the US, majorpolitical events such as the 1994 Health Care Act and the2009 Affordable Care Act might also be reflected in thepeaks in publications. Secondly, the literature shows a shifttoward market oriented policies around 2008, consistentwith the third wave of health reform. However, a differentpattern emerges when the US is excluded from analysis:although market oriented policies slightly increased after2000, volume controls remain predominant in literature.There, we do not find conclusive evidence that after 2000the study of cost containment through market orientedpolicies increased in importance.

Our findings that some main targets are used more oftenthan others might be explained by the fact that some policyeffects are controversial, leading to more academic discuss-ions. In contract, some policy directions might be alreadyimplemented and not under consideration for change.However, the relation between academic literature andpolicy-making is uncertain. Part of the articles included inour research describe policies already implemented, whileother articles suggest policies for future policy-making.Also, academic literature might be lagging on policy makingdue to the time taken up by writing and publishing.

For some OECD countries no articles were found. Addinggray and non-English literature possibly might align ouranalysis better to the interests of policy makers. Englishpeer-reviewed literature might form an incomplete proxyof what policymakers and researchers actually considerto be possible options. Our validity controls show thatalthough policies considered by policy-makers do not sub-stantially differ from those found in the literature, somedifferences in relative use are visible. For example, thetwo external sources of policies showed relative high useof demand policies, like cost sharing and benefit packagereductions.

The relative attention on cost containment policiesseems to differ between types of health system. Highernumbers of cost containment policies in market provisionsystems like Canada and Germany might reflect that these

icy 120 (2016) 486–494

have more difficulties in containing costs [52], althougha publication bias toward market based provision sys-tems could also be present. Furthermore, we expected thatmarket based provision systems would attract relativelymore attention on market oriented cost containment poli-cies [53,54]. Similarly, public provision systems might beexpected to attract more attention for budgeting and priceand volume controls. However, market oriented policiesare comparatively more often suggested for public provi-sion systems like the United Kingdom and Sweden, whilebudgeting and pricing strategies are more often suggestedfor market based provision systems (other than the US).This might indicate that researchers look into alternativesolutions to enhance the cost containment possibilities oftheir healthcare system.

If policy makers use the existing literature in design-ing and implementing cost containment policies, this couldinduce to the emergence of more hybrid health systems[7,55,56]. However, for the US the literature about cost con-tainment is more biased toward market oriented policies.This might suggest that in the US, strategies such as budget-ing and price controls are not considered to be very realisticpolicy options [46]. Alternatively, the US might be moremarket oriented for cost containment presently as histor-ically the US system might have lagged behind in marketconstraints compared to other OECD countries [57].

When designing cost containment measures, govern-ments and policymakers can benefit from an encompassingoverview of cost containment policies that is grounded inthe peer-reviewed literature. Our model might aid policy-makers by showing possible directions of cost containmentnot previously considered. Combinations of different costcontainment strategies such as price and volume controlsmight lower cost growth; while budgeting might preventcost shifting and market oriented policies might increaseefficiency. Inquiring into combinations of policies couldprovide new insights into effective cost containment. Afollow-up systematic review holds the promise to informscholars and policymakers with strong evidence of the realworld effectiveness of (combinations of) different cost con-tainment policies.

6. Concluding remarks

This article categorizes policy options from the liter-ature directed at health care cost control. The resultingtaxonomy will aid policy makers in considering strategiesto control health costs. We identified forty-one options,which were placed into four main groups: price con-trols, volume controls, budgeting and ‘market oriented’policies. Overall, market oriented policies received mostattention in literature. This was mainly driven by theoverrepresentation of US studies. For other countries, vol-ume controls were the predominant target. We found thatbudgeting and price controls were sparsely representedin literature, especially in studies about the US. Marketoriented policies were mentioned and studied more in

public provision systems like the UK, Sweden and NewZealand. Budgeting was studied more in market provisionsystems like Canada, Germany and France. Cost contain-ment policies could increase convergence in these systems,

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f policymakers do follow such trends in academic costontainment interest in their real world implementationtrategies.

cknowledgments

The authors thank W. van den Hout and two anonymouseviewers for constructive feedback and helpful comments.his research was funded by the Dutch Ministry of Health,elfare and Sport.

ppendix A. Supplementary data

Supplementary data associated with this article can beound, in the online version, at http://dx.doi.org/10.1016/.healthpol.2016.03.007.

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