Pricing the Absence

The Healthcode System  ...  Chapter 8

The previous chapter ended on a phrase: not a bonus at the margin, but the main event. This chapter is about what changes when the main event is the only thing that pays.

Begin with the premise that follows from everything before it. If a provider's livelihood depended not on the procedures performed but on whether the people in their care got well and stayed well, every incentive this series has catalogued would invert. The code would stop being the thing chased and become, at most, the thing recorded. Recall the sixth chapter's hardest line: that you cannot code an absence, that the disaster averted leaves no trace the apparatus can read. The proposal here is the attempt to pay, at last, for that absence  ...  for the stent that was never needed, the admission that never happened, the population quietly kept out of the hospital.

The mechanism has two parts, and the first is a matter of proportion. The majority of a provider's income  ...  not a sliver, not a year-end bonus, the majority  ...  would be staggered against the totality of patient and population outcomes over time. Each word carries weight. Totality means the whole arc of a panel's health, not a single encounter or a single tidy metric. Staggered means paid in tranches as those outcomes accrue and hold, rather than settled the moment a service is rendered. Majority means this is the structure of the income, not a garnish on fee-for-service. When most of the money rides on whether people are well, the daily question in the exam room shifts from what can I bill to what will actually help, and the code subsides from master to clerk.

The second part answers the objection the first invites. Outcomes depend on the patients one begins with. A clinic serving the poor, the sick, and the unhoused will post worse raw numbers than a concierge practice in a wealthy suburb, through no fault of its medicine. A model that paid on absolute outcomes would simply reward doctors for choosing easy patients. So the incremental metrics are benchmarked not against an ideal but against the system-wide average for comparable populations: a provider is paid for moving their panel's health relative to where similar panels sit, and for improving it over time. The reward goes to the clinic that takes the hardest cases and moves them, not to the one that started downhill.

That is the proposal. The rest of this chapter is the part most proposals skip  ...  the reckoning with what it would demand and where it would strain, because a reform sold without its difficulties is the kind that gets oversold and then abandoned.

The first difficulty is attribution. Health is multi-causal and care is fragmented across many hands. When a diabetic patient improves, the credit belongs in some unknowable proportion to the primary physician, the endocrinologist, the pharmacist, the patient's own resolve, and the grocery store that finally opened nearby. No formula assigns that credit cleanly, and any model claiming to is lying. The honest response is to attribute at the level of the team and the population rather than the single encounter, to accept imprecision, and to let the benchmarking wash the noise out across a large enough panel. Imperfect, and still an improvement on pretending the procedure code was ever the unit of value.

The second difficulty is the one this entire series should teach us to expect: the moment you pay for a number, the number becomes a target, and in this system the number is still a code. The cautionary tale is already running. Medicare Advantage pays health plans according to each enrollee's risk score, a number built from diagnosis codes  ...  and the result is the textbook abuse. The Medicare Payment Advisory Commission projects that the program will be overpaid by roughly eighty-four billion dollars in 2025, of which some forty billion traces to "coding intensity," the practice of recording extra diagnoses to make patients appear sicker and lift the score; much of the remainder comes from quietly enrolling the healthier.[1] Nearly every large plan has faced allegations of this upcoding.[2] The lesson is not that paying for the patient is hopeless. The lesson is that any such model must be built from the start in the knowledge that it will be gamed  ...  with auditing, with risk adjustment that resists inflation, with benchmarks that penalize cherry-picking  ...  and that even then it will be gamed at the edges. The aim is not a system that cannot be gamed. The aim is one in which the honest path pays better than the gamed one.

The third difficulty is time, and it presses toward the next chapter. Outcomes accrue over years; prevention's dividend may arrive a decade later and land in another payer's budget, after the patient has changed jobs, switched plans, or aged into Medicare. A payment cycle runs a year. That mismatch is real, and it is why even this model, generous as it is toward prevention, strains at prevention's longest horizons.

The fourth difficulty is the transition itself. A sudden switch would break the providers running on the thinnest margins, the rural hospitals and safety-net clinics that serve precisely the populations hardest to move. The change must be staged: a rising floor of outcome-based payment over years, money advanced for the care coordinators and data systems that outcomes demand, and protection for those carrying the sickest panels while they build the capacity to succeed. Done carelessly, the cure bankrupts the patients who need it most.

A fair reader will notice that none of this escapes measurement, and the seventh chapter warned exactly that. The defense is precise. This model does not abolish the code; it aims it. A procedure code asks what was done to the patient. An outcome measure asks whether the patient is well. Both are imperfect proxies and both can be gamed, yet one points toward the goal and the other points away from it. Moving the majority of the money from the first question to the second does not free medicine from codes... it points the codes, for the first time, at health.

Even aimed perfectly, the model reaches only as far as a clinician's panel can plausibly influence. It can pay for the population that never needed the stent. It cannot pay for the housing that kept the asthma at bay, the wage that bought the vegetables, the schooling that let a patient read the label and follow the dose. Those belong to no provider's panel and answer to no payment cycle. This is the necessary half  ...  the largest, most honestly decoupled half a payment model can deliver. The other half was never medicine's to bill, and building it is the work of the final chapter.

Notes

1. The Medicare Payment Advisory Commission (MedPAC) projected, in its March 2025 report, that Medicare would spend roughly 20% more on Medicare Advantage enrollees than on comparable traditional-Medicare beneficiaries  ...  about $84 billion in 2025  ...  with approximately $40 billion attributable to "coding intensity" (recording additional diagnoses to raise risk scores) and much of the remainder to favorable selection. MedPAC, Report to Congress (March 2025); Becker's Payer Issues; RISE Health.

2. Nearly every major Medicare Advantage plan has faced or settled allegations of upcoding, and the HHS Office of Inspector General identified billions of dollars in questionable risk-adjustment payments tied to in-home assessments and chart reviews. Becker's Payer Issues; HHS Office of Inspector General.