The Paradox of Liberal Intervention: Health Policy and the American Welfare State

Abstract

This article presents the Medicare and Medicaid programs as typical examples of liberal interventionism and then discusses the consequences of present patterns of state intervention in U.S. health care. Before 1980, the U.S. government assisted both providers and recipients through financial outlays. Now, however, while seeking to cut costs, the government has become more involved in regulating the activities of both hospitals and physicians. The vehicle of this change in state intervention is the diagnostic related group, or DRG, system of prospective payment to hospitals, adopted in 1983. The article shows how the DRGs, system of prospective payment to hospitals, adopted in 1983. The article shows how the DRGs affect the delivery and substance of health care and concludes that DRGs enhance the capacity of the state to govern the health care system as a whole and manage its factors of production. This "step-by-step" growth of government regulation in a political atmosphere that endorses private enterprise and marketplace rate setting is termed the "paradox of liberal intervention."