Monday, April 23, 2012

Medicare's Poor Incentivizing

Today's Johns Hopkins Bloomberg School of Public Health news feed provided a link to an article on what has been described as waste in the Medicare system.  The key is that as part of the health care reform legislation back in 2010, payments to most Medicare managed care plans were cut, but there was an incentive created to make bonus payments to plans that offer high quality care.

The concern now is that that the bonus payments have been given to plans with only mediocre quality care.  The plan has cost more than was intended as the bonuses have gone to many more plans than were expected.  It may seem patently obvious but giving bonuses to a large number of plans with so-so quality will not provide any incentive to provide care at the highest quality level.  That type of incentive might have been given by using the same amount of money (or perhaps even less) to provide a significant bonus to a smaller number of Medicare plans.

The Obama administration claims that it will not cancel the program as it is still expected to help to improve the quality of care being provided.

This is obviously highly questionable, and, if the newspaper story is correct, this is not likely to be a cost-effective way to improve the quality of care.

While the amount of money is small relative to the entire health care or Medicare budget is small, the principle is that making poor use of even small amounts of resources will sooner or later add up to poor uses of large amounts of resources.

Something to think about as we move forward with the implementation (or not) of the health care reform legislation from 2010. 

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