State, local governments get back into health-care planning Officials return to role once denounced by Reagan.


After a decade in which health costs rose rapidly and many people lost access to care, state and local health officials around the country are returning to the kind of planning denounced by the Reagan administration as a tool of heavy-handed government regulation.

State officials are adopting new laws and regulations to slow the construction of hospitals and nursing homes and the purchase of costly medical equipment. At the same time they are convening groups of doctors, consumers, hospital executives, insurers and employers to negotiate the distribution of health-care resources.

In 1974, Congress created a national network of state and local agencies to develop plans for the number and distribution of hospital beds. Hospitals generally had to get approval from a state agency before offering new services or buying major equipment.

In the 1980s, at the urging of the Reagan administration, Congress and many states abandoned formal health planning as an onerous form of regulation that choked off competition in the market for health care.

But from 1981 to 1991, medical prices rose more than twice as fast as the Consumer Price Index for all items. Total national spending on health care soared to $738 billion last year, from $290 billion in 1981. Insurance premiums also soared, and health insurance became unaffordable for many.

In 1981, the government spent more than $150 million on health planning. President Ronald Reagan's argument for ending federal support of the program was that it discouraged competition and protected high-cost suppliers of goods and services. Some California officials still express that view.

But in many other states, officials say the free-market model of unchecked competition failed to curb the growth of health costs and spending.

The market, in fact, is not free in the traditional sense because private health insurers and the government pay much of the cost of medical care, reducing the pressure that consumers might otherwise exert to hold down costs. The Commerce Department estimates that the United States will spend $817 billion on health care this year, up 11 percent from last year.

James R. Kimmey, dean of the School of Public Health at St. Louis University, said the planning revival "comes from business coalitions that see planning as a way to control costs for their members. It comes also through the efforts of state and local governments, reflecting their concern with the problems of the uninsured and the escalating cost of Medicaid."

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