Restructure Medicare & Medicaid: Economic Factors— Rise in Usage of “Open Access” Healthcare Plans Makes It Harder to
Control Patient Choices...Subsequently, Cost of Care Increases
Societal demand for less restrictive health insurance has driven a gradual switch to open access plans. These plans offer consumers greater choices of medical providers, but at higher costs.
Share of Tightly Managed vs. Open Access Healthcare Plans in USA, 1988 - 2008 ATi mee mm me = te ma i =~ Se
—— Open Access (PPO + POS)
—Tightly Managed (Conventional + HMO)
% of All Healthcare Plans
Other (HDHP)
0% T T T T T T T T T T T T T T 1 1988 1996 2000 2002 2004 2006 2008
Note: PPO is Preferred Provider Organization, which allows enrollees to select any doctor / hospital in the insurance provider's network without going through a
primary care physician. HMO is Health Maintenance Organization, which requires enrollees to coordinate ail healthcare via a primary care physician (a family
doctor). POS is Point Of Service, which combines the features of an HMO and a PPO. HDHP is High-Deductible Health Plan, a form of catastrophic coverage with
lower premiums and higher deductibles than a traditional plan. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009; KPMG Survey of
KP Employer-Sponsored Health Benefits, 1993, 1996; The Health Insurance Association of America (HIAA), 1988 (@E www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 293
Restructure Medicare & Medicaid: Economic Factors—
Less Incentive for Consumers or Providers to Control Costs When Someone Else (Government / Taxpayers) Pays the Bills
Out-of-Pocket Spending Accounted for Just 12% of Healthcare Spending in 2009, Down from 48% in 1960
Out-of-Pocket Payments
Medicare + Medicaid Payments
== =Qut-of-Pocket Medical Payments as % of Disposable Income ~---
35%
Medicare Introduced
Payments as % of Total Healthcare Spending
C/O
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
KP Source: Department of Health & Human Services, Centers for Medicare & Medicaid Services. (@ www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 294
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