Does A Very Strange Distribution Lead to a Sacrifice in the Hope of a More Interesting Endgame?

Brad DeLong notes an experiment subject (as is the wont of the Obama Administration to date) to regulatory capture:

In a surprising move, the Obama administration will extend special bonus payments meant to reward top-performing Medicare Advantage insurers to those that score only average ratings….The law says bonuses, which start in 2012, would go to insurers that scored at least four out of five “stars” on a set of quality measurements. Instead, a “demonstration project” authorized by Medicare officials will extend bonus payments to plans that score at least three stars. Based on this year’s star ratings, the change means 62 percent of all Medicare Advantage insurers…will qualify for the quality bonuses, compared with only 14 percent of plans under the health law provisions.

If those figures are accurate, then 48% (62-14) of all M.A. insurers are judged to provide “average” (three star) quality.

Perhaps more importantly, 38% (100-62) are judged to be substandard. (The good news is that those M.A. insurers have only 16% of the market. The bad news is that they have 16% of the market.)

In the optimistic version, the new structure facilitates culling the worst of the herd while not damaging that plurality of users who are receiving “average” care.

The pessimistic version is to suspect that those 16% who receive substandard care are in non-competitive markets, and will therefore end up, for the next three years, paying more for the privilege of being ill-served and then receive only marginal benefit from the HIEs.

I’m uncertain whether Dr. DeLong is a pessimist, or is just looking at the additional short-term spending and ignoring that the endgame is to have quality providers in the HIE, and punishing the bulk of the market for the ills of the few this early will make improvements later on less effective.

Then again, I’m uncertain whether I should trust that the Administration knows what it’s doing on its Signature Issue. Which is, as Digby noted in another context, rather more the problem for that Administration.