Over the last 20 years, Medicare has increasingly turned to pay-for-performance arrangements as a central strategy for improving care and outcomes. To date, dozens of pay-for-performance arrangements have been implemented as stand-alone programs or components of broader risk contracts. No longer demonstrations, many are now fixtures in the payment system by statute.
From the outset, the pay-for-performance movement has been propelled by calls to pay for “quality instead of quantity,” “value instead of volume,” or “health instead of health care.” The logic of these slogans seems unassailable—who would not want to get more for their money by spending it on something better? Yet an accumulated body of theory and evidence questions whether pay for performance is sound policy. In reconciling the slogans with the science, 3 questions arise. Why has pay for performance not worked? Can it be fixed? And how can quality be improved if not by paying for it?