Medicare & Medicaid payment ratios and private payor subsidies

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. Healthcare Service Payment to Cost Ratio, 1990 - 2006 0, 140% — Private Payor — ~~ Medicare — Medicaid 120% 110% 100% 90% Payment to Cost Ratio 80% 70% 60% | T T T T T T T T T T T T T T T T 1 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. www.kpcb.com 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/ easing Use of 2. Cost Shi a ernment the Private ursement nment Lowers ursement Rate to Providers Private Marke Government Mar. KP ource: Doug Simpson, Morgan Stanley Healthcare Research. (@E) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 298 HOUSE_OVERSIGHT_020990