Consumer and provider incentives have been advocated as a method of creating more competition in health services, reducing cost inflation, and providing more options for consumers. This article discusses the rationale for such incentives, the various types of incentives, strategies for implementations, and a case study of one successful implementation effort. Each employer needs to develop and use both company-specific and areaspecific data as a prerequisite to the development of incentives which are tailored to the unique circumstances of that employer. Some incentives can be implemented by the employer alone, while others are best implemented through coalitions of insurance companies. A comprehensive approach should prove more successful in containing costs than previous piecemeal efforts.
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