OBJECTIVES: Various strategies to address health care spending and medical costs continue to be debated and implemented in the US. To date, these efforts have failed to adequately contain the growth of health care cost. An alternative strategy that has elicited rising interest among policymakers is budget caps. As budget caps become more prevalent, it is important to identify which features are needed to ensure success, both in terms of cost reduction and health improvement.
METHODS: We explored the impacts of different features of budget caps by comparing hypothetical service level and global budget caps across three annual budget cap growth strategies over a 10-year time frame in 2005-2015 for eight of the most commonly occurring conditions in the US. Health was assessed by a measure of disease burden (disability-adjusted life-years).
RESULTS: The results indicate that budget caps have the potential for creating savings but can also result in patient harm if not designed well. As a result of these findings, five principles were developed for designing budget caps and should guide the use of budget caps to address medical spending.
CONCLUSIONS: As public discussion grows about the use of budget caps to constrain health spending, it is critical to recognize that the budget cap design will determine whether there is potential harm to public health. Budget cap design should consider variability at the condition level, including patient population, improvements in health, treatment costs, and the innovations available, to create both savings and maximize patient health.
