Impractical Scheme of the Day


The health policy reform world has, in my view, a tragic if understandable tendency to get bogged down in the swamps of the politically viable so I’m always glad when someone puts something obviously unpassable on the table. Here’s Robert Waldman:

One politically unfeasible approach to this would be to assign people randomly to HMO’s and pay the HMO’s based on their health but have the HMO’s pay for their health care. Then the HMO decides incentives. You have to decide how much a life is worth (and eyesight and all that) but it doesn’t depend on individual income and the decisions are made by an organization with tons of data.

No way this is going to fly in the real world. But unlike a lot of other state-market hybrids that are really just a way to try to buy off the interests of incumbent firms, this really would capture some important benefits of market competition. Firms would become more profitable insofar as they promoted better health outcomes and also become more profitable insofar as they avoid costly medical expenditures. Importantly, the HMO is rewarded not only for delivering effective medical care (though they are rewarded for that) but also for getting their patients to do things that aren’t strictly “medical” (walk more, stop smoking) but do improve health.

It’s a total non-starter for a whole bunch of reasons, including most notably that nobody is going to accept the total lack of consumer choice this involves, but thinking about infeasible plans serves a useful function in terms of structuring our thinking.