Medicare Cost-Control Scheme Begins

The program is running out of dough, but experts say the new system is unlikely to work

In the Obama administration's effort to transform the American health-care system, perhaps the biggest challenge is whether Obamacare can reign in costs without sacrificing quality. That is particularly urgent when it comes to the Medicare program, which is heading quickly toward insolvency.

After two years of deliberation, the experiment is about to begin. The concept is simple enough: Give hospitals financial incentives to improve the quality of care. Come Oct. 1, Medicare will peg a portion of its hospital reimbursements to the quality of care patients receive during their stays. Hospitals that have high readmission rates will face financial penalties. Hospitals that get high marks in patient satisfaction surveys and other quality metrics will get financial bonuses. The changes affect about 3,000 hospitals around the country.