How to Pay for Health Care

by Michael E. Porter and Robert S. Kaplan

THE UNITED STATES STANDS at a crossroads as it struggles with how to pay for health care. The fee-for-service system, the dominant payment model in the U.S. and many other countries, is now widely recognized as perhaps the single biggest obstacle to improving health care delivery.

Fee for service rewards the quantity but not the quality or efficiency of medical care. The most common alternative payment system today—fixed annual budgets for providers—is not much better, since the budgets are disconnected from the actual patient needs that arise during the year. Fixed budgets inevitably lead to long waits for nonemergency care and create pressure to increase budgets each year. ...

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