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Restructure Medicare & Medicaid: Economic Factors—
Poor Information & Lack of Price Transparency
Make it Harder for Consumers to “Comparison Shop”

Patients are at a healthcare information disadvantage in two respects¹:
• Lack of transparency:
➢ It’s harder for consumers to compare prices of healthcare services from different healthcare providers than in other consumer markets given the complexity of healthcare market.
➢ With employer- / government-subsidized insurance, many patients are ‘locked in’ with their insurance plans that do not incentivize “shopping around.”
• Knowledge gap:
➢ Unlike other markets where consumers tend to use their own information and preferences, consumers depend more on the advice and guidance of physicians or other healthcare suppliers.
➢ Unlike other “merchandise,” healthcare is literally of life-and-death importance to consumers, making risk aversion – and price insensitivity – higher. This price insensitivity is exacerbated because the consumer, in effect, gets it at a discounted price anyway.

KPCB | www.kpcb.com
Source: 1) Accounting for the cost of US healthcare, McKinsey Global Institute
USA Inc. | What Might a Turnaround Expert Consider? 301

Restructure Medicare & Medicaid: Economic Factors—
Consumers Increasingly Demand Expensive Treatment and Are Able to Pay for it With Government Subsidies

Total High-End Surgeries up 50x from 1970-2004, Driven by Medical Advancements + Consumer Ability to Spend Assisted by Government Payments

# of Patients (Aged 50+) Undergoing Advanced Procedures in USA
1970 2004

Typical Costs per Procedure ($)

Coronary Procedures
Angioplasty / Stent Implantation <20,000 1.1 million $12,000
Pacemaker / ICD¹ <10,000 350,000 $15-34,000
Bypass <10,000 220,000 $28,000

Dialysis Procedures <10,000 480,000 $24-72,000 per year

Joint Replacement Procedures
Hip <20,000 390,000 $12,500
Knee -- 440,000 $12,500

Note: 1) ICD is Implantable Cardioverter Defibrillator, which is similar to a pacemaker but for a heart rhythm that beats too fast.
Cost of procedure approximated by Medicare reimbursement.
KPCB | www.kpcb.com
USA Inc. | What Might a Turnaround Expert Consider? 302
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