Nudging patients with incentives

One of the problems of how health care is paid for in the US is what is known as the third-party payer problem: the entity that pays (generally, an insurer) is different from the one making a decision (the patient). As a result, patients are largely shielded from the financial consequences of their healthcare decisions and will frequently select a provider based on other factors. The theory is that if patients were more price-sensitive, more healthcare providers would reign in their prices (perhaps by being more efficient). Kaiser Health News published an article about Colorado's state government (part of a purchasing alliance, along with some other employers) offering patients cash incentives for selecting a provider that was ranked within the 25% for both quality and cost.

The article cited a study that found that various "orthopedic surgeries were an average of 26% lower at ambulatory surgery centers than at hospitals." With that in mind, it is easy to see how the payer can end up saving money, despite giving patients cash incentives. There are still questions of how well incentive programs like this one will fare in the long term, and a key question will be whether patients believe in the quality rankings (or at least that the relevant choices offer adequate quality of care). The end of the article mentions a few reasons that early versions of this program might not survive the long term. Regardless, it seems positive that payers are experimenting with different incentive models to try to steer patients towards better value.