Pay for Performance, Health Inequalities and Equity-Efficiency Trade-offs in Primary Care

We develop an approach to assess equity-efficiency trade-offs when designing financial incentives for healthcare providers. We develop a theoretical model of provider behaviour in primary care under a pay-for-performance scheme, which mimics the Quality and Outcome Framework in England. We show how a change in the reimbursement tariff for process measures of quality affects the distribution of health across socioeconomic groups, whilst maintaining budget neutrality. We then calibrate the model and simulate the effect of different policy interventions, using type-2 diabetes as our primary illustration of the methodology. The simulations include: a change in reimbursement for process measures of quality within a health condition, e.g. incentivising statins for patients with diabetes; changes in tariffs across different diseases (e.g. diabetes versus chronic obstructive pulmonary disease); changes in provider reimbursement for patients differing by socioeconomic group. The simulations illustrate how inequality aversion can be systematically taken into account when assessing the effect of changes on financial incentives on the health distribution across socioeconomic status. Our approach can inform the design of financial incentives to achieve policy objectives such as improving the health of poorer groups.