Follow the Money: Money Matters in Health Care - Just Like in Everything Else

Abstract

In health care, as in everything else, money matters. Of course, money is not the only thing that matters - but it matters a lot - perhaps more than all the other factors combined. What we pay for and how we pay for it profoundly affects the quality and availability of the care that is provided (and not provided) and the lives and fortunes of all involved (including those presented with the bill).

If all were well with the health care system, the observations in the prior paragraph would be of no particular significance. Yet, to say the least, there is no shortage of problems with the U.S. health care system. What these problems have in common is that some (and, more often than not, most) of the blame is properly attributable to misaligned economic incentives.

Unless and until we alter the core incentives created by our existing payment system, we will get more of what we’ve already got - a dysfunctional non-system that delivers uncoordinated care of widely varying quality at a high cost. Unfortunately, the health reform proposals under consideration are unlikely to alter the core incentives, and in large part, they simply “double down” on a dysfunctional payment/delivery system.

Keywords: health reform, incentives, payment, delivery system, health care

JEL Classification: K23, K32, L11, L18