Is cost containment working?

It has become fashionable in recent months to herald the reduction in rising health care costs-with many volunteers lining up to take the credit. The Reagan administration has pointed to the Medicare prospective payment system initiated in October 1983 as a major factor in the slowing trend. Avertisements taken out by the American Hospital Association in major news magazines suggest that improved efficiency and innovation by hospital managers-including greater emphasis on ambulatory surgery, home health care, shared services, and growth of multihospital systems. Health insurance companies and major corporations stress changes inemployee benefit plans as a major contributor. This article attempts to assess how much progress is taking place, assemble the relevant evidence on the nature of this progress and likely causes, and speculate on future trends.