Pay for Performance in Medicare: Evidentiary Irony and the Politics of Value

Abstract

Pay for performance (P4P) is of growing importance in the Medicare program. Pay-for-performance policy has the support of political actors in both parties and in the legislative and executive branches; of experts, business, and consumer interests; and in a qualified way, of health care providers. The evidence that P4P improves quality or reduces cost, however, is scant, although P4P proponents claim that the program is evidence based. This article reviews the history of Medicare P4P, documents its widespread support, and evaluates both the evidence of its effectiveness and the expert discourse about that evidence. The article analyzes the political reasons for Medicare P4P's popularity despite its evidentiary deficiencies and emphasizes its role in the politics of value. Pay for performance allows Medicare policy makers to (1) reformulate intractable cost and quality problems as more malleable value problems; (2) offer an acceptable quid pro quo for payment negotiations with providers; and (3) reach a rare, if shallow, consensus based on the ideological ambiguity of P4P.