The most commonly used method of control is a budget ceiling for all expenditure or large parts of it, reinforced by manpower controls in the case of Spain, Ireland and Italy. Overall budget financing can be applied irrespective of the share of resources collected in compulsory health insurance contributions. Eight Member States have used ceilings of expenditure, normally stated in advance in cash terms, as the main weapon to control costs. In Denmark there are negotiated limits for expenditure by local government. The other seven with capped budgets are Belgium, Germany, Ireland, Italy, Spain, Portugal and the United Kingdom. Belgium and Germany have separate budgets for the main expenditure components but in the latter, health promotion and certain care outside hospital is not budget-limited.

In theory it may seem that non-governmental health insurers cannot be bound by this sort of restriction, but in practice governments have used their powers to restrict or veto any increases in compulsory health insurance contributions, approve any charges levied on patients, and impose reductions in the scope of the insurance offered. Budgets have been imposed on or negotiated within individual hospitals irrespective of their ownership, even where they receive their income from many different health insurers per day of care. This has been done in Germany, the Netherlands and in Belgium where bed-day quotas have the same impact. In Luxembourg, from 1995, overall budgets are to be negotiated for each hospital. In France, this approach has been applied to public hospitals and to operating theatre costs in private hospitals. Private hospitals have also to agree their expected volume of services in advance. In Belgium, the amount of clinical pathology services per day of hospital care is also limited. Thus hospitals in eleven of the twelve countries are or will be under some type of budgetary control. The only exception is Greece.

Budgets have also been applied to total payments to doctors, as in Germany. An increase in services leads to a proportionate reduction in the level of the fees paid. This system was also tried in the Netherlands for specialists but was unsuccessful. Relative value scales for fee-for-service payments to doctors were also introduced in Australia, Japan and the RBRVS payment structure in the United States and the aim is to reduce incentives for supplier-induced demand. A ceiling has been placed on payments for pathology services outside hospital in Belgium and France and, in the latter, also for ambulance services, private practice nurses and other health professionals except doctors. Such systems of control are not needed where doctors are paid salaries. The main impact of budget control has been on hospitals, leading to pressure to reduce lengths of stay, rationalise the stock, transfer hospitals to other uses or sell them and to develop alternatives to care in hospital.

The UK and Germany use budgets to control out-of-hospital prescribing costs. The specific measures will be discussed in section 2.5.

In France, the government has reached an agreement with the pharmaceutical industry which is supposed to lead to controls on volume sales in exchange for greater leeway in fixing prices for some medicines. Under the agreement concluded in January 1994 national targets will be set for pharmaceutical expenditure. A provisional target of 3.2 per cent increase for 1994 has already been fixed, well below the 7.5 per cent increase in 1993.