Restructure Medicare & Medicaid: Economic Factors— Rising Healthcare Costs Disproportionately Borne by Employers and Individuals Over the last few decades, private payors (employer-sponsored health insurance plans) have consistently paid more than government payors (Medicare / Medicaid) and have, in effect, subsidized government reimbursement. 1a0% Healthcare Service Payment to Cost Ratio, 1990 - 2006 ° — Private Payor 130% ~~ Medicare — Medicaid 120% 2 3S x 110% w & @ 100% ec rreggg ter eta moo -------------------- r= = 90% e ou 80% 70% 1990 1992 1994 1996 1998 2000 2002 2004 2006 KP Source: Avalere Health Analysis of American Hospital Association Annual Survey data, 2006, for community hospitals. i USA Inc. | What Might a Turnaround Expert Consider? 297 Restructure Medicare & Medicaid: Differential Payment Rates Can Create a Negative Cycle Leading to Erosion of Private Healthcare Coverage and Higher Entitlement Spending 5. Employers/ c rop 4, Higher easing Number Insuran emiums ninsured i oe P - 7. easing Use of aiket VOSmaren Medicaid / Medicare 2. Cost Shi onto 8. ernment the Private Market R ursement sure Rises 1. Provi harge Higher to 9. nment Lowers Private Marke ursement Rate to Government Mar Providers KP ource: Doug Simpson, Morgan Stanley Healthcare Research. Ce USA Inc. | What Might a Turnaround Expert Consider? 298 HOUSE_OVERSIGHT_020990