cost containment

who is being targeted: supply-side

providers

who is being targeted: demand side

patients

which tool is being used: market

shopping + competition

which tool is being used: regulatory

government rules + limits

Supply-side market approach: Goal

Use market forces to pressure providers to lower costs

Supply-side market approach: Examples

high deductibles - patients shop around - providers compete

Supply-side market approach: challenges

patients don’t shop for health care like normal goods

Supply-side regulatory: Goal

change how providers deliver care by restricting or guiding what they can offer

Supply-side regulatory: examples

formularies control which drug are available

Practice guidelines telling physicians which services to use

Supply-side regulatory: Challenges

U.S. government doesn’t centrally ration care

Waitlists + selective referral conflict with U.S. culture

Physicians don’t like loss of autonomy

Demand side regulatory: Goal

U.S. government authority to control spending

Demand side regulatory: Examples

DRGs - fixed payment per diagnosis

Medical loss ratios - limit insurer profit

Cost growth benchmarks - set caps

Demand side regulatory: Challenges

Providers refuse public patients, increase volume or shift to make money, hide or shift costs

Demand side market: Goal

Change patient behavior so they chose better care

Demand side market: Examples

Patient education

make low-value care more expensive - push patients toward higher value care

Demand side market: Challenges

Patients don’t have price/quality info

Information asymmetry

Doctors have their own financial incentives