Will Pay For Performance Backfire? Insights From Behavioral Economics
October 11th, 2012
Editor’s note: In addition to Steffie Woolhandler and Dan Ariely (photos and linked bios above), this post is authored by David Himmelstein, a professor at the CUNY School of Public Health at Hunter College.
Paying for performance (P4P) has strong intuitive appeal. Common sense and rigorous studies tell us that paying more for, say, angioplasties or immunizations yields more of them. So paying doctors and hospitals for better care, not just more of it, seems like a no-brainer. Yet while Medicare and many private insurers are charging ahead with pay-for-performance (P4P), researchers have been unable to show that it benefits patients.
Findings from the new field of behavioral economics may explain these negative results. They challenge the traditional economic view that monetary reward is either the only motivator or is simply additive to intrinsic motivators such as purpose or altruism. Studies have shown that monetary rewards can undermine motivation and worsen performance on cognitively complex and intrinsically rewarding work, suggesting that P4P may backfire.
The Case for Calm Over Rising Health Costs
By AMY WALLACE
IN 1946, a British newspaper shocked its readers by running an article with this ominous-sounding headline: “Nearly Half of U.K. Student Grades Are Below Average.” Read that back to yourself slowly, and you’ll realize, of course, that the law of averages would have it no other way. But man, does it sound bad.
In his new book, “The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t” (Yale University Press) William J. Baumol uses that headline to help us understand his central idea about the diverging paths of certain costs in our economy.
Mr. Baumol and a Princeton colleague coined the term “cost disease” in the early 1960s. Put simply, it refers to the concept that the costs of health care, education, the live performing arts and several other “personal services” depend largely on human evaluative skills — a “handicraft element” that is not easily replaced by machines. These costs consistently rise at a rate much greater than that of inflation because the quantity of labor required to produce these services is hard to reduce, while costs in other areas of the economy can be brought down via technology or other factors What that means, writes Mr. Baumol, a professor at the Stern School of Business at New York University and a professor emeritus at Princeton, sounds pretty frightening: “If health care costs continue to increase by the rate they have averaged in the recent past, they will rise from 15 percent of the average person’s total income in 2005 to 62 percent by 2105.” In other words, our great-grandchildren will have less than 40 cents of every dollar to spend on everything besides their health. Like the British headline, that surely sounds like cause for alarm.
7 More Cancer Scientists Quit Texas Institute Over Grants
By THE ASSOCIATED PRESS
AUSTIN, Tex. (AP) — At least seven more scientists have resigned in protest from Texas’ embattled $3 billion cancer-fighting program, claiming that the agency in charge of it is charting a “politically driven” path that puts commercial interests before science.
The Cancer Prevention and Research Institute of Texas, created with the backing of Gov. Rick Perry and the cyclist Lance Armstrong, a cancer survivor, has awarded nearly $700 million in grants since 2009; only the National Institutes of Health offers a bigger pot of cancer-research money.
Scrutiny of how the state agency selects projects has intensified since May, when its chief scientific officer, Dr. Alfred G. Gilman, a Nobel laureate, resigned in protest after it approved a $20 million commercialization project without scientific review.
Phillip A. Sharp, another Nobel laureate, was among seven scientists who resigned last week, writing in his resignation letter that the agency’s decisions have carried a “suspicion of favoritism” in how the state is handing out taxpayer dollars.
A Possibly Fatal Mistake
By NICHOLAS D. KRISTOF
MY wife and I attended my 30-year college reunion a couple of weekends ago, but the partying was bittersweet. My freshman roommate, Scott Androes, was in a Seattle hospital bed, a victim in part of a broken health care system. Strip away the sound and fury of campaign ads and rival spinmeisters, and what’s at stake in this presidential election is, in part, lives like Scott’s.
Scott and I were both Oregon farm boys, friends through the Future Farmers of America, when Harvard sent us thick envelopes. We were exhilarated but nervous, for neither of us had ever actually visited Harvard, and we asked to room together for moral support among all those city slickers.
We were the country bumpkins of Harvard Yard. Yet if we amused our classmates more than we intended, we had our private jokes as well. We let slip (falsely) that we kept deer rifles under our beds and smiled as our friends gave them a wide berth.
Scott was there when I limped back from the Worst Date in History (quite regularly), and he and I together worked our way onto the Crimson, the student newspaper. He had an omnivorous mind: Scott may be the only champion judge of dairy cattle who enjoyed quoting Thomas Macaulay, the 19th-century British historian. Scott topped off his erudition with a crackling wit to deflate pretentiousness (which, at Harvard, kept him busy).
By nature, Scott was even-keeled, prudent and cautious, and he always looked like the mild-mannered financial consultant that he became. He never lost his temper, never drove too fast, never got drunk, never smoked marijuana.
Well, not that I remember. I don’t want to discredit his youth.
Yet for all his innate prudence, Scott now, at age 52, is suffering from Stage 4 prostate cancer, in part because he didn’t have health insurance. President Obama’s health care reform came just a bit too late to help Scott, but it will protect others like him — unless Mitt Romney repeals it.
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