Cost sharing as a cost containment strategy: comments on Laurence Seidman's paper

by Joseph P. Newhouse


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Seidman advocates cost sharing in medical care financing, and argues that cost sharing should be related to income. This paper suggests that Seidman has overlooked some theoretical and practical problems. Low-income families with medical expenditures would have to file a tax return to obtain reimbursement, yet many such families currently do not file. Many administrative issues raised by income-related cost sharing deserve serious attention, and costs of resolving them may compromise any gains from an income-related system. Newhouse prefers to experiment with schemes that vary health insurance premiums according to the health provider selected. An increased market share for health maintenance organizations is in this spirit, as are certain new insurance plans.

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