Fee for service distorting health care

Very interesting chart from the Congressional Budget Office which shows Medicare spending per beneficiary broken down by hospital region.



I'll let Josh Patashnik at The New Republic explain what we're looking at,

care, not necessarily Where there are more doctors performing expensive procedures, more procedures get performed, even if they contribute minimally or not at all to improved health outcomes. (Notice how dark Boston is!) This is largely a result of Medicare's fee-for-service reimbursement system, which provides an incentive to deliver morebetter care.

This is of course not just how Medicare works but also the way private insurance works. Doctors are paid per procedure, regardless of outcome. There have been some attempts to create incentives for better care and outcomes but generally speaking this is how the system works. The incentives are all wrong and naturally lead our health care spending to balloon all the while being completely detached from the actual medical outcomes of the procedures.

Changing this system is going to be a monumental task and one that will need to be approached sensitively to avoid a rebellion from the doctor's lobby. Easing into the change by instituting generous incentives while gradually shifting away from per procedure payments seems like the most logical path.