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November 06, 2015

Opinion: Pay-for-Success Financing Model Shows Promise

The growing technique of pay for success, which uses an intermediary to fund a government program at no risk to taxpayers, shows much promise, a health-care program evaluator writes in an opinion article in The Wall Street Journal.

Under the pay-for-success model, the intermediary recruits investors who cover the cost of the program. If the program reaches its outcome goals, the government agency reimburses the investors. The funding model is being used for a wide range of programs, 

"Pay for Success financing aligns the incentives of private investors, government, and nonprofits to fund innovative programs, to ensure they are rigorously evaluated, and to cut off the ones that don’t work," writes Joseph Daniel Anson. He also notes some of the model's drawbacks, including misguided incentives and potentially biased program evaluations.