Mark V Pauly & Gail Wilensky (Milbank Quarterly 11/30/2020)

The question remains of how to best move the US health care system from one that pays primarily for volume, especially for physician care, to one that encourages greater focus on higher value, efficiently produced care. Whether that can happen is unclear and will require bold action by the new Biden administration.

Here is what that bold action might entail. In terms of payment for quality, the payer or “principal” needs to decide in advance what outcomes it wants to incentivize the agents (hospitals or doctors) to achieve, and find hard metrics that will trigger substantial enough rewards or penalties to meet those targets. A payer, for example, might define a target rate of risk-adjusted performance for joint replacement for an accountable care organization (ACO) population—and then find the dollar amount per payment bundle needed to get the ACO hospitals and physicians to do just that amount. Or Medicaid might pay health systems much more to take care of social problems like housing or food adequacy for poor and disadvantaged populations.

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