Example of Misalignment

One of the points in George Halvorson’s book Health Care Reform Now! is about misalignment of incentives.  Providers are not paid for better outcomes.  They are paid per activity (i.e., to keep people coming back).  It’s a key point which deserves a much longer discussion.  That being said, I couldn’t help but think of this when reading yesterday’s WSJ article “Flu Economy Takes Unexpected Turn“.  A few quotes that it mentions include:

• CEO of Walgreens at shareholder meeting – “If attendees of the meeting needed to cough, he joked, they should leave the room and ‘go to a movie theater or on a bus’ to spread their germs. ‘We’re really hoping for a very strong flu season’.”
• “Unfortunately, people have not been getting sick at a rate that we would all like yet.” P&G CEO
• “On the pediatric side, young kids coming into the hospital, that’s a nice margin for us, as well.” CFO of LifePoint Hospitals

Now, the easy discussion here would be to criticize these executives for being insensitive, but that’s not the problem.  The problem is that we have incented our healthcare system so that people make money when people are sick.  To my earlier post, this doesn’t mean people shouldn’t make money, but it means we should find a way to incent them to make people better.  We have decades of benchmark data (somewhere).