As health spending continues to rise globally, pay-for-performance can be an attractive policy tool for promoting high-quality services at lower costs. But there are concerns that it weakens the finances of poor-performing hospitals in low-income areas. This column examines the efficiency and equity consequences of the introduction of pay-for-performance in the Medicare insurance programme in the US. It finds that after the payment reform, high-quality insurers selected healthier enrollees, shifting the distribution of high-quality insurance to the healthiest counties and worsening regional disparities in healthcare access.