Yet another Obamacare incentive program crashes and burns

It seems as though yet another of Obamacare’s many “nudging” efforts, aimed at creating incentives for the population to behave in ways deemed by technocrats to be of maximum public benefit, has failed dismally.


The Hospital value-based purchasing program (HVBP), established by the Affordable Care Act, was designed to link the payments hospitals received with the quality of care they provided.

“CMS took back 1.25 percent of Medicare reimbursement at hospitals paid under the IPPS in fiscal year 2014,” a report in Becker’s Hospital Review read. “The resulting $1.1 billion was dispersed to hospitals based on how well they performed on healthcare quality measures, like treatment of heart attack and congestive heart failure, as well as patient satisfaction.”

In fiscal year 2014, 778 hospitals lost more than 0.2 percent of their Medicare pay, while 630 hospitals received a bonus of more than 0.2 percent.

For 2015, CMS is increasing the applicable percent reduction, the portion of Medicare payments available to fund the value-based incentive payments under the program, to 1.5 percent of Medicare reimbursements, resulting in about $1.4 billion in value-based incentives.

In short, the program was designed to “nudge” those hospitals deemed to be underperforming to increase the standards of the care they provided. However, a report in noted that a study of hospitals was recently conducted by Cornell University’s Andrew Ryan and a team of researchers with the intention of determining whether or not that program was effective. They found no noticeable change in the care provided by the hospitals that were punished under the HVBP program.


“It’s possible that the incentives in this particular program might be too small to encourage hospital administrators to make big investments,” Vox’s Sarah Kliff wrote. “They could be making a calculation: it would be more work than its worth to do better.”

In order to address that issue, she suggests that the British National Health Service, which ties 20 percent of a doctor’s pay to the quality of care they provide based on government evaluations, seems like the way to go.

In other words, the only solution to the problems of government “nudging” is more “nudging.”

But here is the true rub in Kliff’s report:

One other possibility: Ryan and his colleagues noticed, in the data, is that when you look back at 2008, there is some evidence that hospitals were improving back then at a faster rate than the non-participants. This suggests that hospitals may have begun improving quality in preparation for these policy changes a few years in advance, and are now reaping the benefits of that advance planning.

So, hospitals were increasing the standards of care well before a massive health care overhaul was passed and that rate of improvement stalled in the wake of the implementation of this new law. Whatever could that mean…


“This would have meant the hospitals were preparing for the program two years prior to the Affordable Care Act passing, and would have had a sense whether they would fall in the bonus pool or not,” Kliff writes. She notes that, while it was not federal policy until the passage of the ACA in 2010, people had been talking about an incentive program like this since at least 2003.

One would have to assume then that she is suggesting that hospital administrators were adjusting their behavior according to a law which had not passed. Which is… positively baffling.

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