There are two problems in “demonizing” health insurance plans and MA. One is that it diverts attention from perhaps the most important long-term problem for health care: the need to control rising costs. Recent estimates say that expenditures on health care have grown from approximately seven percent of gross domestic product (GDP) in 1970, to nine percent in 1980, twelve percent in 1990, fourteen percent in 2000, and sixteen percent in 2008. Expenditures are projected to be over nineteen percent of GDP in 2019. While it is certainly true that health care insurance plans are not perfect and that there have been “wasteful” benefits offered by MA plans, simply addressing these will not effectively control future health care costs.

This article proposes a systemic change to the payment system used by the MA program. Under this new system, health plans would be rewarded, not on the basis of how much care was provided, but rather on the effectiveness of the care. In other words, these plans will receive payments based on their delivery of “health outcomes,” not their delivery of health services. Health outcomes include measures of survival, data “derived from symptoms or even the results of physical examinations,” and “the results of simple tests, like blood levels, or more complex physiological measures.” They also include “information collected from patients, . . . reflect[ing] how they have experienced the illness and the effects it has had on their lives.” A number of obstacles have hindered the consideration of using health outcomes alone as the basis of a practical payment system, but this article argues that these obstacles can and should be overcome.