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An Economic Analysis of Outcomes-based Payment in Healthcare
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Volume 30, 2023Abstract
The United States spends significantly more on healthcare than any other developed country in the world, yet the US experiences relatively poor health outcomes when compared to other developed nations. To address this issue, the Patient Protection and Affordable Care Act (ACA) of 2010 includes directives to “improve the quality and efficiency of healthcare” by “linking payment and quality outcomes.” An outcomes-based payment model links provider payment directly to patient outcomes and the cost of care to change provider incentives and improve the value of care provided. In this paper, I analyze the current fee-for-service payment model in the United States healthcare system and the potential market corrections that can be made through the implementation of an outcomes-based payment model. This analysis is conducted utilizing standard and behavioral economic theory with accompanying practical recommendations for successful implementation.