Paying for results: the lesson from medicine

Medicine is moving from paying for each service to paying for whether patients get healthier, which shows that a huge, regulated system can change what it pays for.

In plain words

For most of the last century, doctors and hospitals were paid for every visit, test, and procedure. Nobody got paid when you stayed well. Then the people paying the bill started to move. Hospitals now lose money when too many patients come back within thirty days, and groups of doctors share in the savings when they keep patients healthier. Education can do the same. Stop paying for hours in a seat. Start paying for what a person can do.

Evidence and sources

• Fee-for-service "contains incentives for increasing the volume and cost of services, whether appropriate or not." National Commission on Physician Payment Reform, report of March 2013.
• "We don't have a health-care system in America; we have a 'sick care' system." Senator Tom Harkin, Newsweek, December 2008.
• Medicare's accountable care organizations saved the program a record $2.4 billion in 2024. Centers for Medicare & Medicaid Services.
• About 45 percent of U.S. health care payments in 2024 were tied to arrangements accountable for quality and cost. Health Care Payment Learning & Action Network (2025).

Questions this answers

• What is value-based care?
• What is wrong with fee-for-service medicine?
• Can schools be paid for outcomes instead of attendance?

Where this falls short

The shift is slow and uneven. The Congressional Budget Office found the government's first decade of payment experiments cost more than they saved (September 2023).

In the book

In Four Weeks, Not Four Years: Chapter 11.

Read the full answers

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