Restructure Medicare & Medicaid: Economic Factors—Possible Solutions 1) Cost-Sharing * Cost-sharing can help control demand for a portion of healthcare by creating incentives for consumers to shop for most cost-effective treatments (although those benefits would be somewhat mitigated by the skew in health spending toward high users). * Once again, a Math Problem: Consider a routine physician office visit in which a provider suggests and / or patient requests various tests, procedures, etc. - Patient #1 covered by a plan with a $20 co-pay (i.e., a flat fee regardless of the level or intensity of care performed during the visit) - Patient #2 covered by a plan with a 10% co-insurance for in-network care (i.e., responsible for 10% of the aggregate billed charges) - Clearly, patient #2 will become more sensitive to necessity and cost of care beyond a level of $200 of total healthcare services - Note that deductibles drive similar dynamic as a co-pay: once the deductible is met, the member has little or no “skin in the game” * Only 14-18% of employer-sponsored health insurance plans use pro-rata cost sharing (i.e. co-insurance in example #2 above). Most (77%) insurance plans only use a co-pay (in example #1), which gives consumers little incentive to shop the most cost-effective treatment path. KP Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2009 i USA Inc. | What Might a Turnaround Expert Consider? 307 Restructure Medicare & Medicaid: Economic Factors—Possible Solutions 2) Reimbursement Reform Reimbursement reform could help shift drivers of payment from quantity of care to quality of care. The following list provides a few options to consider. * Bundled Payments: Providers get a fixed budget to treat an episode of care (i.e. a broken hip). Exceeding the budget means providers absorb additional costs; staying under it lets provider benefit from savings. - Examples: PROMETHEUS Payment System’, Medicare Acute Care Episode Demonstration?