ABSTRACT
This chapter explores more marginal options for change that could be enacted in the absence of other reform in the healthcare system and that make sense even if the overall level of spending changes little. The goal of cost sharing is to provide cost awareness and thus give beneficiaries incentives to make careful use of services. An area of high cost sharing is the coinsurance on skilled nursing facility services. Skilled nursing facility coinsurance is out of line with the daily costs of such services since its rate is tied not to the costs of skilled nursing care but to the hospital deductible. Hospital benefits absorbed the largest share of all Medicare payments—nearly 68 percent in 1980. The Prospective Payment System structure makes it relatively easy to make changes such as freezing or limiting the base payments for all hospitals. Physicians are the second largest source of Medicare payments after hospitals.
