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Follow the Money: Money Matters in Health Care, Just like in Everything Else
Published online by Cambridge University Press: 06 January 2021
Abstract
I suspect that our collective search for villains — for someone to blame — has distracted us and our political leaders from addressing the fundamental causes of our nation's health-care crisis. All of the actors in health care — from doctors to insurers to pharmaceutical companies — work in a heavily regulated, massively subsidized industry full of structural distortions. They all want to serve patients well. But they also all behave rationally in response to the economic incentives those distortions create. Accidentally, but relentlessly, America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity and discourage transparent competition based on price or quality.
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References
1 David Goldhill, How American Health Care Killed My Father, The Atlantic, Sept. 2009, at 38, 40.
2 See, e.g., Harold, D. Miller, From Volume to Value: Better Ways to Pay for Health Care, 28 Health Aff. 1418, 1418-19 (2009)Google Scholar; Ellen-Marie Whelan & Judy Feder, Payment Reform to Improve Health Care: Ways to Move Forward 2-5 (Center for American Progress, 2009), available at http://www.americanprogress.org/issues/2009/06/health_payment_reform.html Stuart Guterman et al., Reforming Provider Payment: Essential Building Block for Health Reform 1-2 (Commonwealth Fund, 2009), available at http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2009/Mar/1248_Guterman_reforming_provider_payment_essential_building_block_FINAL.pdf.
3 A business case for quality exists when a provider can earn a profitable financial return on a quality-enhancing investment. See Sheila, Leatherman et al., The Business Case for Quality: Case Studies and An Analysis, 22 Health Aff. 17, 18 (2003)Google Scholar. See also David Blumenthal & Timothy Ferris, The Business Case for Quality: Ending Business as Usual in American Health Care vii (2004), available at http://www.commonwealthfund.org/Content/Publications/Fund-Reports/2004/Jul/The-Business-Case-for-Quality--Ending-Business-as-Usual-in-American-Health-Care.aspx (“The absence of a ‘business case’ for improving the quality of health care—that is, evidence that health systems, providers, and others who invest in quality improvement will see a return on investment within a reasonable time frame—is widely acknowledged to be one of the most important obstacles to improving health care in the United States.”).
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6 Id. at w541.
7 David Leonhardt, Making Health Care Better, N.Y. Times Magazine, Nov. 8, 2009, at 31, 46 (emphasis added).
8 Posting of Alain C. Enthoven to Health Affairs Blog, Would Reform Bills Control Costs? A Response to Atul Gawande, http://healthaffairs.org/blog/2009/12/22/would-reform-billscontrol-costs-a-response-to-atul-gawande/?source=promo (Dec. 22, 2009, 08:27 EST).
9 Stephen, F. Jencks et al., Rehospitalizations Among Patients in the Medicare Fee-for- Service Program, 360 New Eng. J. Med. 1418, 1421 (2009)Google Scholar.
10 See Arnold, M. Epstein, Revisiting Readmissions – Changing the Incentives for Shared Accountability, 360 New Eng. J. Med. 1457, 1457-58 (2009)Google Scholar; Ashish, K. Jha et al., Public Reporting of Discharge Planning and Rates of Readmissions, 361 New Eng. J. Med. 2637, 2643-44 (2009)Google Scholar.
11 See William M. Sage & David A. Hyman, Combating Antimicrobial Resistance: Regulatory Strategies and Institutional Capacity, Tulane L. Rev. (forthcoming, 2010).
12 See David, A. Hyman & Charles, Silver, The Poor State of Health Care Quality in the U.S.: Is Malpractice Liability Part of the Problem or Part of the Solution?, 90 Cornell L. Rev. 893- 993 (2005)Google Scholar.
13 Id. When did they buy them? When the cost of not having them (measured malpractice premiums and adverse verdicts) became higher than the cost of obtaining the technology. Id. at 961-62. To be sure, this does not paint a reassuring picture of the ability of the profession to place the interests of patients: your safety is our first and highest concern, unless of course, it is cheaper to injure you than not, in which case you’re on your own.
14 Leatherman et al., supra note 3, at 30.
15 David A. Hyman, Health Care Fragmentation: We Get What We Pay For, in The Fragmentation of U.S. Health Care: Causes and Solutions (2010).
16 DAVID, A. KINDIG, Purchasing Population Health: Aligning Financial Incentives to Improve Health Outcomes, 33 Health Serv. Res. J. 223, 223 (1998)Google Scholar (providers “get paid for what we do, not what we accomplish” (quoting former Assistant Secretary for Health Dr. Philip Lee)).
17 See, e.g., Institute of Medicine, Rewarding Provider Performance: Aligning Incentives in Medicare 4 (2007) (“The current Medicare fee-for-service payment system is unlikely to promote quality improvement because it tends to reward excessive use of services; high-cost, complex procedures; and lower-quality care … . Services that contribute greatly to high-quality care that are labor- or time-intensive and rely less on technical resources, such as patient education in self-management of chronic conditions and care coordination, tend to be undervalued and are not adequately reflected in current payment arrangements. Little emphasis is placed on efficiency (achieving high clinical quality with a given amount of resources). The lack of incentives for comprehensive, coordinated care discourages services targeting early intervention and prevention that can ultimately reduce the use of expensive services, such as avoidable hospitalizations.”); Institute of Medicine, Crossing the Quality Chasm: A New Health System for the 21st Century 17 (2001) (“Current payment methods do not adequately encourage or support the provision of quality health care,” and in some instances, they may actually impede local innovations and efforts to improve quality); Karen, Davis, Paying for Care Episodes and Care Coordination, 356 New Eng. J. Med. 1166, 1166 (2007)Google Scholar (“The fee-for-service system of provider payment is increasingly viewed as an obstacle to achieving effective, coordinated, and efficient care. It rewards the overuse of services, duplication of services, use of costly specialized services, and involvement of multiple physicians in the treatment of individual patients. It does not reward the prevention of hospitalization or rehospitalization, effective control of chronic conditions, or care coordination.”); Enthoven, supra note 8 (“The incentives in today's dominant payment model are oriented to doing more, spending more, using more complex methods when simpler methods would do just as well for the patient.”).
18 See Leatherman et al., supra note 3, at 17-18 (“[H]ealth care organizations may be reluctant to implement improvements if better quality is not accompanied by better payment or improved margins, or at least equal compensation. Without a business case for quality, we think it unlikely that the private sector will move quickly and reliably to widely adopt proven quality improvements.”).
19 Kevin, J. Hayes et al., Getting The Price Right: Medicare Payment Rates For Cardiovascular Services, 26 Health Aff. 124, 124 (2007)Google Scholar (“If services are underpriced, beneficiaries could have problems with access to care. If services are overpriced, providers might furnish more services than beneficiaries need. In addition to the wasteful spending that accompanies overuse of services, there is the potential for harm through medical errors or iatrogenic disease … [and] physicians might make specialty choices based on perceived underpayment for some services relative to others.”).
20 See David, A. Hyman, Employment-Based Health Insurance and Universal Coverage: Four Things People Know that Aren't So, 9 Yale J. Health Pol’y, L. & Ethics 435, 443-44 (2009)Google Scholar. See also The Story of Deamonte Driver and Ensuring Oral Health for Children Enrolled in Medicaid: Hearing of Testimony Before the Subcomm. on Domestic Policy of the Comm. on H. Oversight and Government Reform, 110th Cong. (2007) (statement of Lorrie Norris, Staff Attorney, Public Justice Center) [hereinafter “Norris Testimony”]; Mary Otto, For Want of A Dentist; Pr. George's Boy Dies After Bacteria From Tooth Spread to Brain, Wash. Post, Feb. 28, 2007, at B1.
21 See Teresa, A. Coughlin et al., Assessing Access to Care Under Medicaid: Evidence For The Nation And Thirteen States, 24 Health Aff. 1073 (2005)Google Scholar; Peter J. Cunningham & Ann S. O’Malley, Do Reimbursement Delays Discourage Medicaid Participation By Physicians?, 28 Health Aff. (Web Exclusive) W17, W17 (2008), http://content.healthaffairs.org/cgi/content/full/28/1/w17? (“Surveys show that about half of physicians accept all new Medicaid patients into their practices, compared with more than 70 percent for privately insured or Medicare patients … [l]ow Medicaid reimbursement rates relative to those of Medicare and private payers are usually considered to be the primary reason for low physician participation in Medicaid. Medicaid fee levels vary considerably across states, and research has consistently shown that Medicaid participation by physicians is higher in states with higher fees than in states with lower fees.”); Peter J. Cunningham & Jessica May, Ctr. for Studying Health Sys. Change, Medicaid Patients Increasingly Concentrated Among Physicians 3 (2006), http://www.hschange.com/CONTENT/866/866.pdf (“Relatively low Medicaid payment rates and high administrative burdens are major reasons for not accepting Medicaid patients, according to physicians … . These concerns also likely explain why physicians in smaller practices are increasingly closing their practices to new Medicaid patients.”); Posting of Jacob Goldstein to WSJ Health Blog, Should Medicaid Pay More For Primary Care?, http://blogs.wsj.com/health/2010/01/06/should-medicaid-pay-more-for-primary-care/ (Jan. 6, 2010, 10:29 EST) (“Medicaid typically pays significantly less than Medicare, which in turn tends to pay less than private insurance. As a result, lots of docs say they lose money when they treat Medicaid patients, and limit the number of Medicaid patients in their practice or refuse to take Medicaid altogether. That can make it tough for people with Medicaid to find care.”).
22 See The American College of Radiology, Campaign for Patient Access, http://www.campaignforpatientaccess.org/.
23 See Press Release, American Medical Association, AMA Releases 22 New “Patient Access Hot Spots” Nationwide – Medicare Cuts to Physicians Will Make Problem Worse (Oct. 22, 2009), available at http://www.ama-assn.org/ama/pub/health-systemreform/news/october-2009/patient-access-hot-spots.shtml.
24 David Olmos, Mayo Clinic in Arizona to Stop Treating Some Medicare Patients, BLOOMBERG, Dec. 31, 2009, http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHoYSI84VdL0 Posting of Jacob Goldstein to WSJ Health Blog, A Mayo Clinic Outpost Won't Take Medicare, http://blogs.wsj.com/health/2009/12/31/a-mayo-clinic-outpost-wont-take-medicare/ (Dec. 31, 2009, 15:40 EST).
25 Cf. Jill, R. Horwitz, Making Profits and Providing Care: Comparing Nonprofit, For- Profit and Government Hospitals, 24 Health Aff. 790 (2005)Google Scholar.
26 See, e.g., How Should Medicare Pay Doctors (National Public Radio broadcast of All Things Considered, Feb. 26, 2010), available at http://www.npr.org/templates/transcript/transcript.php?storyId=124090475 (recounting ongoing efforts to reform Medicare payments to physicians, including adoption of the RBRVS system in 1992, which “worked for a little while until just a few years later, it didn't anymore.”).
27 See Harold, Demsetz, Information and Efficiency: Another Viewpoint, 12 J.L. & Econ. 1, 1 (1969)Google Scholar (“The view that now pervades much public policy economics implicitly presents the relevant choice as between an ideal norm and an existing ‘imperfect’ institutional arrangement. This nirvana approach differs considerably from a comparative institution approach in which the relevant choice is between alternative real institutional arrangements.”); Richard A. Epstein, Simple Rules for a Complex World 32 (1995) (“First-best solutions are rarely, if ever, possible; thus the beginning of wisdom is to seek rules that minimize the level of imperfections, not to pretend that these do not exist. No contract, no association is ever bullet proof: no matter what rights, duties, institutions, and remedies are chosen, in some circumstances they will be found wanting. Bad outcomes are therefore consistent with good institutions, and we cannot discredit these institutions with carefully selected illustrations of their failures. Counterexamples may be brought to bear against any set of human institutions. The social question, however, is concerned with the extent of the fall from grace. The fact of the fall should be taken as a necessary truth, not a shocking revelation. Perfection is obtainable in the world of mathematics, not in the world of human institutions.”).
28 See generally David A. Hyman & William M. Sage, Subsidizing Health Care Providers Through The Tax Code: Status or Conduct?, Health Aff. (Web Exclusive) w312 (2006), http://content.healthaffairs.org/cgi/content/full/25/4/W312 Richard Epstein & David A. Hyman, Controlling the Cost of Medical Care: A Dose of Deregulation, in Antidote: Strategies for Containing America's Runaway Health Care Costs (Brookings Institution Press, forthcoming 2010) (“Decades of scholarship has failed to provide a persuasive rationale for the status quo — let alone evidence that we are getting our money's worth from the foregone tax revenues. It is time to end the charade that an undifferentiated subsidy tied to status can outperform a graduated subsidy tied to quantifiable, objective measures of performance.”); David, A. Hyman, The Conundrum of Charitability: Reassessing Tax Exemption for Hospitals, 16 Am. J. L. & Med. 327 (1990)Google Scholar.
29 I.R.C. § 106 (1986) (“Gross income does not include contributions by the employer to accident or health plans for compensation (through insurance or otherwise) to his employees for personal injuries or sickness.”).
30 As I have noted in another setting, such subsidies are “upside-down,” in that they are worth the most to those who need them the least. Hyman & Sage, supra note 28, at w314. The cost of the subsidy is also substantially greater than the marginal tax rate would indicate. See Austin Frakt, Understanding the Employer Based Insurance Tax Subsidy, The Incidental Economist, Feb. 3, 2010, http://theincidentaleconomist.com/understanding-the-employertax-subsidy (computing that even if “your federal marginal income tax rate is only 20%[,] government (federal and state combined) loses 37 cents of tax revenue for each dollar paid in health insurance as opposed to wage.”).
31 Susan Jaffe, Health Affairs, Health Policy Brief: Tax Debate, July 9, 2009, http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=7 (“Because of the tax exclusion, the amount of forgone income and payroll taxes in 2008 was $226 billion, according to the congressional Joint Committee on Taxation. The Urban Institute's Tax Policy Center estimates next year's revenue loss at $240.5 billion and $3.5 trillion through the next decade. Thus, the tax exclusion for employment-based health coverage is the single biggest subsidy in the federal tax code.”).
32 Epstein & Hyman, supra note 28, at 31.
33 William E. Simon, Dept. of the Treasury, Blueprints for Basic Tax Reform ii (1977), http://www.ustreas.gov/offices/tax-policy/library/blueprints/forward.pdf.
34 But see Sir Henry Maudsley, 82 F.R.D. 221, 297 (“Reform sir, reform? Don't speak to me of reform. Things are bad enough as they are.”).
35 See Paul, Ginsburg, Comparing the Traditional Medicare Program to Private Insurance, Senate Finance Committee, 1999 WL 300800 (1999)Google Scholar (testimony before the Senate Finance Committee); Bryan, Dowd et al., A Tale of Four Cities: Medicare Reform and Competitive Pricing, 19 Health Aff. 9, 10 (2000)Google Scholar; Len Nichols, Lessons from the Competitive Pricing Advisory Committee Experience for the Medicare + Choice Program and Long Term Reform, Senate Finance Committee, 2001 WL 316119 (2001) (testimony before the Senate Finance Committee) (“Once local opposition galvanized, [Competitive Pricing Advisory Committee (“CPAC”)] members and HCFA professional staff were not well equipped to solicit defensive support among Members of Congress. If one Member cares a lot, and most other Members are basically indifferent, he can get what he wants, eventually. So, Medicare pricing reform will occur only when the leadership decides it really wants to do that, and prevents amendments like the one that stopped the CPAC demos in their tracks.”).
36 See, e.g., Letter from Peter R. Orszag, Director, Office of Management & Budget, to Nancy Pelosi, Speaker of the House of Representatives (July 17, 2009), http://www.whitehouse.gov/omb/assets/blog/Combined_IMAC_docs_-_Package.pdf.
The Senate bill refers to an Independent Medical Advisory Board (“IMAB”). Rather than enter the debate over whether the entity is better called IMAC or IMAB, this paper uses the original formulation.
37 Specifically, the rate of increase in Medicare spending must exceed the rate of increase in GDP per capita plus one percent (beginning 1/18) or the average of CPI-U and CPI-M, based on a five year period ending that year (4/13 through 12/17).
38 H.R. 3403, 111th Cong. (2008) (enacted) (“It shall not be in order in the Senate or the House of Representatives to consider any bill, resolution, amendment, or conference report that would repeal or otherwise change this subsection.”). Of course, Congress can not bind the hands of a future Congress.
39 About Medpac, http://medpac.gov/about.cfm (last visited April 3, 2010).
40 Ruth Marcus, The F-22 Model for Medicare, Wash. Post, July 22, 2009, http://www.washingtonpost.com/wpdyn/content/article/2009/07/21/AR2009072102811.html.
41 Derek Thompson, The CBO Might Be Wrong, But Orszag Isn't Right, The Atlantic, Aug. 4, 2009, http://www.theatlantic.com/business/archive/2009/08/the-cbo-might-bewrong-but-orszag-isnt-right/22729/ (“The reason to take health reform out of politics is that we're afraid Congress will vote down the toughest, most substantial reforms. But once tough IMAC recommendations are authorized and mandated by the government through this occult agency, you can bet that lobbyists and other groups will come screaming to Congress, branding hot-button terms like ‘rationing,’ and demanding a law to overturn the recommendations … . How much popular pushback would IMAC withstand? I don't know. But it's not hard to imagine Americans, rightly or wrongly, feeling besieged by an un-democratic body of experts sticking their noses in the doctor-patient relationship.”).
42 See, e.g., Jason, Furman, Health Reform Through Tax Reform: A Primer, 27 Health Aff. 622, 622 (2008)Google Scholar; Jason, Furman, Our Unhealthy Tax Code, 1 Democracy 45 (2006)Google Scholar, available at http://www.democracyjournal.org/article.php?ID=6466. See also Teddy Davis, Will Obama Tax Your Health Benefits?, ABC News, May 12, 2009, http://abcnews.go.com/Politics/Business/story?id=7562814&page=2. Notably, in 2006, a bipartisan federal commission had called for far-more sweeping reform of the taxation of employment-based health insurance. The recommendation was widely ignored. The principal academic criticism of the proposal came from a law professor at Washington & Lee University, and a political science professor at Case Western University. See, e.g., Timothy S. Jost & Joseph White, Congress’ Test on the Cadillac Tax, Roll Call, Dec. 22, 2009, http://www.rollcall.com/news/41838-1.html. Professor Jost and White do admit that “many eminent economists, the White House and much of the press seem to think it [the excise tax on high-cost coverage] is a wonderful idea.” Id.
43 Posting of Merrill Goozner to The Health Care Blog, The Coming Clash Over “Cadillac” Plans, http://www.thehealthcareblog.com/the_health_care_blog/2009/12/the-coming-clashover-cadillac-plans.html#more (Dec. 7, 2009).
44 Robert Pear & Steven Greenhouse, Accord Reached on Insurance Tax for Costly Plans, N.Y. Times, Jan. 15, 2010, at A1.
45 See Gerald Mayer, Cong. Research Serv., Union Membership Trends in the United States, at summary (2004), available at http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1176&context=key_workplace Press Release, Bureau of Labor Statistics, Union Members — 2009, available at http://www.bls.gov/news.release/pdf/union2.pdf.
46 Of course, the politics of doing so are daunting. As Jonathan Oberlander nicely noted, “[w]hen middle-class, insured Americans think about health reform, what they have in mind is not a proposal to make their health insurance benefits subject to taxation.” Jonathan Oberlander, The Politics of Paying for Health Reform: Zombies, Payroll Taxes, and the Holy Grail, 27 Health Aff. (Web Exclusive) w544, w547 (2008). To be sure, it didn't help that then-Senator Obama had savagely attacked Senator McCain's campaign proposal to tax employment-based health insurance, and provide an off-setting tax credit — and then turned around and embraced only a portion of the tax component of Senator McCain's proposal.
47 Posting of Catherine Rampell to N.Y.Times Economix Blog, Economists’ Letter to Obama on Health Care Reform, http://economix.blogs.nytimes.com/2009/11/17/economistsletter-to-obama-on-health-care-reform/ (Nov. 17, 2009, 18:31 EST). See also Sam Stein, Economists Tout Health Care Reform in Letter to Obama, Huffington Post, Nov. 17, 2009, http://www.huffingtonpost.com/2009/11/17/economists-tout-health-ca_n_361469.html.
48 Letter from Alan M. Garber, Dir., Stanford Univ. Ctr. for Health Policy, to Senator Harry Reid, Majority Leader, U.S. Senate (Dec. 7, 2009), available at http://timeswampland.files.wordpress.com/2009/12/12-7-09-economists-letter-to-harryreid1.pdf.
49 Posting of Karen Tumulty to Time Swampland Blog, Economists Growing More Way of the Senate Health Bill, http://swampland.blogs.time.com/2009/12/07/economists-growingmore-wary-of-the-senate-health-bill/ (Dec. 07, 2009, 17:22 EST).
50 In this context, a “favorable” CBO score means that the total cost of the reform is less than President Obama's $900 billion target, with no increase in the deficit during the ten year budget window. Obtaining this score required front-loading the taxes; back-loading the benefits, excluding the costs of fixing the cuts automatically imposed by the Sustainable Growth Rate formula, and assuming cuts in Medicare in the out years that are unlikely to materialize.
51 See David, A. Hyman, The Massachusetts Health Plan: The Good, the Bad, and the Ugly, 55 Kan. L. Rev. 1103, 1115 (2007)Google Scholar (“Finally, the regulations that were adopted do nothing about the cost of health care in Massachusetts – and in the long run, that problem will swamp any reform proposal, including the Massachusetts health plan.”); Diane Archer, Inst. for America's Future, Massachusetts Health Reform: Near Universal Coverage, But No Cost Controls or Guarantee of Quality, Affordable Health Care for All, available at http://www.ourfuture.org/files/MA_Health_Reform_EMBARGOED.pdf?#; Campaign for America's Future Website, Massachusetts Health Reform, http://ourfuture.org/healthcare/massachusetts (“While reform has been very effective at increasing accessibility of insurance … the Massachusetts model is unsustainable, with skyrocketing costs and no systems in place to drive value.”).
In fairness, as noted above, the federal reform bills include a variety of pilot programs and demonstration projects designed to control costs, while the Massachusetts reform plans included nothing on the subject. But, as described previously, there are plenty of reasons to be skeptical that any such programs will be deployed broadly, even if they prove successful.
52 Kevin Sack, With Health Care for Nearly All, Massachusetts Now Faces Costs, N.Y. Times, Mar. 16, 2009, at A1 (“Those who led the 2006 [Massachusetts reform] effort said it would not have been feasible to enact universal coverage if the legislation had required heavy cost controls. The very stakeholders who were coaxed into the tent — doctors, hospitals, insurers and consumer groups — would probably have been driven into opposition by efforts to reduce their revenues and constrain their medical practices, they said. Now those stakeholders and the state government have a huge investment to protect.”).
53 Jonathan Gruber, Response: In Massachusetts We Got Reform Right, New Republic, Mar. 22, 2009, http://www.tnr.com/blog/the-treatment/response-massachusetts-we-gotreform-right (“[T]he Massachusetts law explicitly did not take on the fundamental determinants of medical cost growth--and this is, in my mind, the genius of the approach. For decades, efforts to move towards universal coverage have always floundered on the shoals of cost control … . [T]he choice between coverage first or coverage as part of a comprehensive cost control package is a false one. Coverage first is the natural stepping stone to a comprehensive cost control. By bringing everyone into the tent of insurance coverage, and getting all the interest groups behind a common goal, a move to universal coverage could be viewed in retrospect as the key step towards the cost control this country so desperately needs.”). See also Michael Vitez, Mass. Health Care Has Lessons, Phil. Inquirer, Mar. 31, 2009, at A1 (“‘We did it right in Massachusetts. That's the most important lesson,’ said Stuart Altman, a health-policy expert at Brandeis University. ‘The first part was cover everyone, make it work … . Trying to control costs brings every constituent group out against you.’”).
54 Jonathan Cohn, Massachusetts Miracle — or Catastrophe?, New Republic, Mar. 17, 2009, http://blogs.tnr.com/tnr/blogs/the_treatment/archive/2009/03/17/massachusettsmiracle-or-disaster.aspx (“Note, by the way, that the state is now moving forward on cost control. A new commission is investigating ways of moving the state away from straight feefor- service and towards payment systems that reward high quality and efficiency … . [M]any officials and experts in Massachusetts have argued that it is the clear progress on coverage that makes this new discussion possible.”).
55 Div. of Health Care Fin. & Policy, Mass. Office of Health & Human Services, Recommendations of the Special Commission on the Health Care Payment System 53 (2009), available at http://www.mass.gov/Eeohhs2/docs/dhcfp/pc/Final_Report/Final_Report.pdf.
56 Liz Kowalczyk, Hospitals Attack State Pay Proposal, Boston Globe (Metro), Oct. 4, 2009, at A1.
57 Office of Attorney General Martha Coakley, Investigation of Health Care Cost Trends and Cost Drivers 13 (2010), available at http://www.mass.gov/Cago/docs/healthcare/Investigation_HCCT&CD.pdf.
58 Kay Lazar, Governor Wants Health Cost Veto, Boston Globe, Feb. 11, 2010, at B1.
59 See id.
60 See Steven, Kerr, On the Folly of Rewarding A, While Hoping for B, 9 Acad. of Mgmt. Executive 7, 9 (1995)Google Scholar.
61 Russ Banham, Lawyers for Less: Large Companies are Opting for Cheaper, More- Predictable Alternatives to the Traditional Billable-Hours, CFO Mag., Oct. 1, 2005, at 106, available at http://www.cfo.com/printable/article.cfm/4443639 (“‘When you pay for hours, you get hours; when you pay for results, you get results,’ he says. ‘Perhaps as much as 20 percent of billed hours in the billable-hour model are inflated. You end up rewarding inefficiency.’”). See also Posting of Ashby Jones to Wall St. J. Law Blog, Flat-Fee or Hourly Billing, It Doesn't Matter: Lawyers Will Work Hard, http://blogs.wsj.com/law/2010/01/26/flat-fee-or-hourly-billing-it-doesnt-matter-lawyerswill-work-hard/ (Jan. 26, 2010, 11:45 EST) (“In-house counsel may loathe the billable hour. But one thing the billable hour is good for is getting outside counsel to work. There's a very simple built-in incentive there. If you pay by the hour, well then, you’ll get hours.”).
62 See also Gerald L. Musgrave et al., Lunch Insurance, 15(4) Regulation 16, available at http://www.cato.org/pubs/regulation/regv15n4/reg15n4a.html (extending the health insurance model into “lunch insurance”); Hyman, supra note 15 (describing how air travel would operate if it was as fragmented as health care delivery market); Jonathan Rauch, If Air Travel Worked Like Health Care: Fasten Your Seat Belts – It's Going to be a Bumpy Flight, Nat’l J. Mag., Sep. 26, 2009, http://www.nationaljournal.com/njmagazine/st_20090926_4826.php (same).
63 Glen Whitman, Slavery, Snakes and Switching: The Role of Incentives in Creating Unintended Consequences, Libr. Econ. & Liberty, May 7, 2007, http://www.econlib.org/library/Columns/y2007/Whitmanincentives.html (“For a reward or punishment to be effective, it also must aim at the right target. That's not as easy as it sounds. S. E. Rhoads, in his book The Economist's View of the World, tells the story of the Italian town of Abruzzi, which had a problem with too many vipers. To motivate citizens to kill vipers, the town fathers created a viper bounty to be paid for dead vipers. ‘Alas, the supply of vipers increased. Townspeople had started breeding them in their basements’ (p. 58). The problem, of course, is that the town fathers rewarded the wrong thing. What they wanted was not more dead vipers, but fewer vipers in the first place. Abruzzi's story may be apocryphal, but its mistake is not.”). The article provides several other examples of good intentions gone awry because reformers ignored the incentive effects of their actions.
64 Bill Bryson, A Short History of Nearly Everything 439 (2003).
65 Ezra Klein, The Education of a Cost Cutter (Or How Peter Orszag Stopped Worrying and Learned to Bypass Congress), Wash. Post, July 24, 2009, http://voices.washingtonpost.com/ezra-klein/2009/07/the_education_of_a_cost_cutter.html (“Orszag's big idea right now is to depoliticize the process a bit by taking decisions about payment for oxygen out of the hands of individual members of Congress and putting them into the hands of an independent panel of experts modeled off of MedPAC. But note something important about it: It's not an idea meant to solve a particular policy problem. It's meant to solve a particular political problem. The problem with Congress is that it's not well-suited to, well, anything, but it's particularly ill-suited to small, technical decisions.”).
66 William Safire, Follow the Proffering Duck, N.Y. Times Magazine, Aug. 3, 1997, at SM20 (“Who first said ‘Follow the money’? Everybody knows the answer: ‘Deep Throat,’ the anonymous source quoted by Bob Woodward and Carl Bernstein in their book ‘All the President's Men.’ Those three words from a mysterious Administration official whose identity is unknown even today impelled the young journalists to money laundered in Mexico and ultimately to payments to burglars and a Nixon White House slush fund.”).
67 See generally David, A. Hyman, Lies, Damned Lies, and Narrative, 73 Ind. L. J. 797 (1998)Google Scholar.
68 See Safire, supra note 66, at SM20.
69 Goldman also wrote The Princess Bride, Butch Cassidy and the Sundance Kid, and the Year of the Comet, among other movies. See, e.g., IMDb.com, William Goldman, http://www.imdb.com/name/nm0001279/ (last visited April 9, 2010).
70 The problem is not unique to health policy. As Goldman memorably observed about the ability of Hollywood executives to predict whether a movie would be a success or a flop, “nobody knows anything.” William Goldman, Adventures in the Screen Trade: A Personal View of Hollywood and Screenwriting 39 (1983).