Ethics and Business Law

Date of this version


Document Type



health care reform, Medicare Advantage, payment system, Obamacare


The predominant form of paying for health care in the United States, the Fee-for-Service system, creates inefficient incentives and has led to rising costs of health care. Scholars have suggested a number of alternative payment systems to correct these inefficiencies. Many of these suggestions were incorporated into the landmark health care reform legislation package of 2010 (Obamacare). However, because they rely on inefficient metrics of quality measurement, these proposals and the legislation itself will be insufficient to stop rising health care costs.

Instead, this article presents a specific proposal for using health outcomes to calculate risk-adjusted payments to health care providers. Use of this metric would properly align incentives of health care providers with the objectives of improving quality of life. Implementation of this metric should be limited initially to large health insurance plans. Doing so enables these plans to create tailored incentives for their participating providers. This payment scheme can be adopted as part of Medicare Advantage, in which Medicare beneficiaries select a private health insurance plan for their coverage. While Obamacare does not sufficiently slow the rise of health care costs, these changes will lead to a health care system with both high quality and manageable costs.

Published in

Akron Law Review

Citation/Other Information

44(3), 727-768.