Better Incentives for Health Care Providers and Insurers
Medicare generally pays providers of the same service the same fee, regardless of the quality of care. If hospitals and physicians were paid amounts that reflected objective measures of the quality of care provided, with differential payments tied to higher quality and more efficient care, ideally many problems of underuse and misuse of care could be reduced. In practice, while "pay for performance" holds a great deal of promise, it may be difficult to fully implement because of the complexity of producing objective measures of quality. For instance, tying payments to process measures-such as rewarding cardiac physicians based on the proportion of their heart attack patients using beta blockers-may cause providers to place too much emphasis on limited aspects of providing high-quality care. Alternatively, tying payments to outcomes measures-such as rewarding cardiac surgeons whose patients have lower post-discharge mortality rates-may cause providers to face perverse incentives to avoid treating high-risk patients most in need. Adequate payfor- performance measures will require sophisticated techniques to control for underlying differences in patient health, which highlights the importance of developing systems to collect detailed information about the kind of care that patients receive. With the advent and adoption of better health information technology and the development of rigorous and well-tested measures, using pay-for-performance techniques to reimburse providers may become a vital contributor toward higher quality and more efficient care.
High-quality health care may also be encouraged by providing patients with valuable information so they may compare various providers to one another. Competition among health care providers may improve incentives to provide high-value care in two ways: higher quality and lower price. If patients have access to the providers price and quality information, they will have incentives to choose those providers with the highest value of care, and physicians and hospitals will have strong incentives to reduce their fees and improve the quality of care to attract more patients. There are two parts of Medicare where this kind of information is available and these incentives are in place. Private Medicare Advantage plans have strong incentives to offer higher quality care at lower beneficiary premiums to encourage enrollment. The new Part D prescription drug benefit provides information about the price of prescriptions by plan and by pharmacy, provides access to customer service information by plan, and also benefits from price competition among insurers.