Pay-for-Performance in Prison: Using Healthcare Economics to Improve Criminal Justice

For much of the last seventy-plus years, healthcare providers in the United States have been paid under the fee-for-service system, where providers are reimbursed for procedures performed, not outcomes obtained. The result has been a system that combines exploding costs without concomitant increases in quality. Healthcare economists and policymakers have reacted by proposing a number of policies designed to rein in costs without sacrificing quality. One approach is to focus on health outcomes, reconfiguring incentives and structures to deliver healthcare in ways that are both efficacious and efficient. Under a pay-for-performance strategy, providers are paid to improve health by whatever medically-appropriate methods they choose. This means providers are no longer paid for simply doing a given “something” but, rather, are paid for doing “something effective.” In this Article, I argue that the criminal justice system is marked by many of the same distorted individual and organizational incentives that have plagued health care. Most significantly, in all but a handful of jurisdictions, states wholly subsidize commitments to prison — the fee-for-service model of doing “something” — without tying any of these subsidies to outcomes obtained in prison. This means prison is paid for even if it is neither effective nor efficient. These similarities with the healthcare system suggest that an outcome-oriented, pay-for-performance framework borrowed from healthcare economics might, if applied to criminal justice, improve its efficacy and efficiency. I envision this Article as the first of several applying healthcare economics to criminal justice. It will focus on the similarities of the two systems, the ways in which an outcome orientation might provide a useful framework for controlling costs without making quality subservient, and the suggestion that we begin considering sentencing choices within that framework.