Warped incentives meaning that doctors get paid for each service they perform, whether it helps the patient or not.
But on this key reform, paying doctors for quality, not quantity, Medicare is ahead of the president, reports CBS News correspondent Wyatt Andrews.
For the last four years, doctors at Dartmouth-Hitchcock Health in New Hampshire have been part of a Medicare experiment that pays for quality. Doctors get paid for seeing patients, and get a bonus for patients that get better. The clinic gets extra money for high scores in 36 areas, like controlling the blood sugar of diabetics or keeping heart patients on cholesterol drugs.
To keep track, nurses regularly call every patient - as often as it takes - to keep them healthy and out of the hospital.
Special attention goes to patients who've been in hospital - to keep them from having to go back.
Nurses call patients as often as it takes. Patients like Dick Harrington, who is on Medicare, get calls to remind them to check their blood sugar.
All that contact earned Dartmouth a $6.7 million bonus payment - 80 percent of the $8.4 million that Medicare actually saved by avoiding expensive procedures.
Around the country, 10 physician groups are conducting these pay for performance experiments, but the truth is they don't all save money every year. All 10 of the groups improved the health of their patients, but found that saving money on the elderly can take years.
"This is part of the answer," said Barbara Walters, the senior medical director of Dartmouth-Hitchcock.
So when the president calls for payment reform, almost every health care expert says he's right. But the amount he can save, no one knows that for certain.