A financial incentive program to reduce costs and improve quality is the Big Idea to change healthcare practices under the Affordable Care Act. Over the next three years, the Administration will significantly expand current financial incentives for the Center for Medicare and Medicaid Services, private payers, and providers. By 2018, half of all Medicare spending will be linked to rewards for cost control and quality.

This strategy supports the growth of accountable care and bundled-payment contracts as new business models for healthcare. Rewarding performance that cuts costs and improves quality of care is an urgent goal if the U.S. system is to become a more financially sustainable one. But researchers caution that financial incentive programs have to be properly structured to achieve that goal. Rewards must be large enough to matter and better outcomes must be clearly measurable. Designing models with the right balance of effort, performance, and reward will be key to a successful financial incentive program that delivers a healthier U.S. healthcare system.

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