If ...doctors are remunerated based on the procedures they perform, that creates an incentive for them to perform too many procedures that have high costs but produce low benefits. But pay doctors based on the number of patients they see, and they have an incentive to see as many patients as possible, and to skimp on procedures that are time-consuming but potentially useful. Compensate them based on successful patient outcomes, and they are more likely to cream, avoiding the most problematic patients. Jerry Z Muller, The Tyranny of Metrics, February 2018It's perfectly understandable. People react rationally to the incentives on offer. For reasons that might be politically incorrect to suggest, we live in societies where the incentives are increasingly extrinsic - mainly financial - rather than intrinsic, which has to do with the satisfaction of doing a job well. It's a trend, rather than an absolute, but it leads to perverse incentives in many, perhaps most, professions including, as Mr Muller tells us, medicine.
What's to be done? How should healthcare professionals be paid? Leaving it to the market, as some might propose, is not a workable solution. One reason - there are others - is that the information asymmetry is too great. So: let's start with our goal: we want to see improvements in the long-term health of a country's population, and we want such improvements to be made as cost-effectively as possible.
My suggestion is that we apply the Social Policy Bond idea to health. This could be done at a national level. A government would issue Health Bonds that would become redeemable for a large sum once national health levels reach a targeted level, sustained for a period of years or decades. 'Health' would be measured by objective criteria, such as longevity, Quality Adjusted Life Years, infant mortality rates etc. Each of these measures would have to fall into a targeted range before the bonds could be redeemed. Investors would buy the bonds and in doing so find themselves members of a protean coalition all with the same goal: to bring about improvements in the country's health. Having done their bit and (hopefully) having seen the value of their bonds rise, they'd sell their bonds to people willing to bring about further health improvements.
Bondholders' goals would therefore be exactly congruent with those of society: to improve the nation's health with maximum efficiency. Note that, while bondholders might hold the bonds only for short periods, the bonds could be in issue, depending on their redemption terms, for decades. Unlike current policy, they'd be long term in nature.
There are other advantages, one of which is that the government (or other issuing body) would not dictate how our health goals shall be achieved, nor who shall do so. Doctors and hospitals would certainly have some involvement. But bondholders, being motivated to find the most efficient pathways, might find that, for instance, subsidising youth clubs in certain areas, or providing cheap taxi services in others, or giving out free e-cigarettes, or paying doctors differently, would be the least costly ways of seeing results. The possibilities are endless and no government, nor any conventional organisation, can be relied on to investigate, experiment and implement the innovative, diverse, adaptive long-term solutions that will help achieve our goal. Health Bonds would see the creation of a new type of organisation: one whose composition, structure and activities are entirely subordinate to society's goal: improving the nation's health as efficiently as possible.