The 130th Annual Meeting of APHA

Abstract #52481

Mark V. Pauly, PhD, The Wharton School, Health Care Systems, University of Pennsylvania, 3641 Locust Walk, Philadelphia, PA 19104-6218, 215-898-2838, pauly@wharton.upenn.edu

This paper provides a critique based on simple economic theory of the deficiencies in incentives for quality discussed in the empirical examples in recent Institute of Medicine work. It is shown that the report makes some errors in its interpretation of the incentives present in alternative payment systems. As a result, the report is led to conclude that "payment mechanisms can inhibit quality improvements." In contrast, I argue that the problem is not "payment systems" per se but rather the simpler issue of getting the payment level right, and ensuring that informed consumers have choices among health plans offering a variety of payment systems and payment levels. I suggest conditions under which health plans will choose the levels of payment that achieve the levels of quality their members desire and are willing to pay for.

Learning Objectives:

• To learn how economic incentives can be used to improve quality in health care.

Keywords: Financing, Health Care Quality

Presenting author's disclosure statement:
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.