The Many Meanings of Money: A Health Policy Analysis Framework for Understanding Financial Incentives

Health funding reforms often fail to change organizations’ and individuals’ behaviour in the way that policy makers intend. This is perhaps because financial incentive systems traditionally have been designed according to a “reward-punishment,” or behaviourist, model of influencing human behaviour. We argue that this model inadequately captures the way that funding reforms work in real institutional environments. To supplement the behaviourist view, we propose a “communication model” for understanding how social context helps construct financial incentives in the health care system. This model envisions funding changes as essentially sending messages to organizations regarding policy goals and desired behaviours. Like other forms of communication, these messages can be inarticulate, imperceptible, or confusing -- and in any case, open to interpretation. Organizations’ internal and external environments affect their interpretations of, and responses to, funding reforms. We describe three processes that affect the meaning of a funding reform and its consequent incentives: 1) the basic features of the funding structure, which we refer to as the policy maker’s signal; 2) cues and concerns that the affected organizations use to interpret the meaning of this signal; and, 3) issues that mediate organizations’ willingness and ability to respond to the perceived message. This conceptual framework highlights the political and social nature of policy making with financial incentives.