Pay-for-Performance: Is Medicare a Good Candidate?

Abstract

According to one prominent study, adults in the United States receive the generally accepted standard of preventive, acute, and chronic care only about 55% of the time. The likelihood that patients will receive recommended care "varie[s] substantially according to the particular medical condition, ranging from 78.7 percent of recommended care . . . for senile cataract to 10.5 percent of recommended care ... for alcohol dependence." Evidence of low-quality care appears in Medicare, the federal health program for the elderly and disabled. Quality of care does not appear to be higher in areas where Medicare spending is higher. In fact, some studies point to the somewhat paradoxical conclusion that Medicare patients are often less likely to receive recommended care in regions where Medicare expenditures are highest. Third-party payment is a potential contributor to the under-provision of quality health care. Most health care payments in the United States are made by third parties, usually employers, insurers, or government. Those purchasers typically reimburse health care providers on the basis of the volume and intensity of the services provided, rather than the quality or cost-effectiveness of those services. The result is a financing system akin to paying academics on the basis of the volume and intensity of footnotes.