Robert E. Hurley, Ph.D.Virginia Commonwealth University and

the Center for Studying Health System Change

Cross Community Perspectives on Safety Net Models

Overview

Indigent care eco-systems Approaches to ensuring access to care Community Tracking Study Illustrative market experience Extracting some lessons Conclusion

Communities have distinct indigent care “eco-systems”

Multiple approaches to ensure acute medical care availability to low income persons without insurance coverage

Community mores, public policy, provider capacity, extent and nature of demand influence access to indigent care

Communities implicitly or explicitly customize approaches to meet unique needs based on particular circumstances

A balance is achieved, somehow: an eco-system emerges

Methods to Ensure Access to Care

Make it Buy it Subsidized it

-Direct subsidy

-Cross-subsidy

Make it

Directly provide services via government owned facilities and/or employed providers

Classic “safety net” providers, e.g. publicly-owned hospitals, FQHCs, local health dept. clinics

Open door policy (serve all comers) Traditional emphasis on acute care and episodic

delivery Challenge is how to get best value for investment

Buy it

Public sector purchases care from private providers on behalf of persons who cannot afford it themselves

-”vendor payment” programs

- payments typically below market rates Provide/purchase coverage for persons who cannot

purchase it for themselves

-Medicaid expansions, SCHIP, etc

-Opportunities to “privatize” coverage

Subsidize—Direct Subsidy

Provide support to selected providers to defray cost of uncompensated care

- designated for groups/classes of individuals

- may include (arguably) tax exempt status Public and private (e.g. conversion foundations)

resources committed to targeted programs and populations

- e.g. Disproportionate share payments to hospitals (DSH), free clinics

Limited ability to meet large scale needs

Subsidize-- Cross-subsidy

Require providers to donate care and finance donation by generating surpluses from other payers

e.g. EMTALA and other non-discrimination policies Convenient kind of default public policy decision

(“hidden tax” most easily supported; hospital as tax collector)

In addition to providing funds for uninsured, seen as source to make-up for public payer shortfalls

Promotes/perpetuates “cost-shifting”

“Cost-shifting” to Private Payers Hospital Payments as % Costs-1990

89.0% 80%

21.00%

126.60%

103.60%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

Medicare Medicaid Uninsured Private Total

Source: ProPAC, 1992.

“Cost-shifting” to Private Payers Hospital Payments as % Costs-2001

99.4% 98%

12.20%

113.10%104.80%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

Medicare Medicaid Uninsured Private Total

Source: MedPAC, 2003

The Rise and Fall and Rise of Cost-Shifting—1990-2005

Hospital payments as percentage of costs by payer

60.00%

70.00%

80.00%

90.00%

100.00%

110.00%

120.00%

130.00%

140.00%

Private Payers

Source: MedPAC, 2005

Cost-Shifting and its Implications

Cost shifting to private purchasers played key role in promoting managed care revolution

Managed care = systematic suppression of cost shifting

Cost shifting is growing again Many current state reform initiatives (ME, MA, CA)

highlighting cost shifting consequences Can a hidden tax be replaced by not-so-hidden

financing sources???

Community Tracking Study Sites*

Phoenix, AZPhoenix, AZ

Orange County, CAOrange County, CA

Little Rock, ARLittle Rock, AR

Miami, FLMiami, FL

Greenville, SCGreenville, SC

Indianapolis, INIndianapolis, IN

Lansing, MILansing, MI

Northern NJNorthern NJ

Syracuse, NYSyracuse, NY

Cleveland, OHCleveland, OH

Boston, MABoston, MA

Seattle, WA, WASeattle, WA, WA

*Community Tracking Study—Funded by the Robert Wood Johnson Foundation; carried out by the Center for Studying Health System Change

Mix of Coverage in CTS Markets

Mix of Coverage in HSC Markets

Eco-systems in Illustrative Markets

Boston Indianapolis Little Rock Orange County

Boston

Extensive private coverage; relatively generous Medicaid coverage; low level of uninsured (7-8%)

Make Two major public hospitals, 20+ CHCs

Buy Free care pool-DSH and hospital tax supported

Subsidize Public hospitals offer managed care products

to uninsured via subsidies

New universal coverage program being rolled out; combinations of strategies including make, buy, and subsidize—good sensitivity to protecting safety net in transition

Indianapolis

Solid employer coverage, modest Medicaid,

manageable uninsured burden

Make Public hospital with tax support

and AHC affiliation, several CHCs Buy Publicly supported local managed care product

for uninsured paying for ambulatory care at CHCs Subsidize Inpatient care for uninsured concentrated in

public

hospital

Rapid growth in local low income coverage program and growing demands on public hospital and academic specialty departments creating some financial distress.

Little Rock

Modest employer coverage, Medicaid expansive only for children, substantial uninsured population

Make UA Medical Sciences Center major regional source of inpatient and specialty care for indigent

Buy Highly inclusive ARKids (Medicaid and SCHIP)

Cross subsidize Reliance on NFP hospitals and physicians for donated care

Marked disparities between access to care for kids vs. adults; serious shortage of specialty care for uninsured even at AHC

Orange County, CA

Limited employer sponsored coverage, moderate Medicaid participation,

substantial uninsured

Make UC-Irvine—public AHC, only 2 FQHCs in county with 3 million, 19 private CHCs Buy Medically indigent vendor program for

legal county residents

Subsidize Donations to private clinics and free clinics/CHCs, childrens’ hospital

Cross subsidize FP/NFP hospitals provide limited

uncompensated inpatient and ED care

Access to specialty care significant problem and disproportionate burden on relatively small AHC

New state universal coverage proposal now in play

Common Themes

Strength of employer coverage is key Scope of Medicaid is important Public providers (makers) typically backbone Many private providers prone to avoid uninsured

where they can Some success in local low income coverage models

—but typically exploit inpatient care providers Specialty care and prescription drugs can’t be “made”

and are expensive to buy or subsidize, so increasingly difficult to acquire

Contemporary Concerns

Employer-sponsored insurance growth has stalled and appears to be slipping

Premiums rising; benefits being trimmed; take-up rates likely to fall

Extent of “under-insurance” increasing Donor fatigue (contributed charity care) growing Public programs expanding enrollment but

financial burden growing Cost-shifting being quantified and vilified, but

replacement financing mechanism unclear

Broad Strategies—What Could be Done?

Incrementally expand public programs to cover more people

Shore up erosion in employer coverage Expand availability of private coverage via

incentives to individuals Create new grouping mechanisms to overcome

limitations of employer sponsorship Compel private firms to provide coverage or

individuals to acquire coverage Consider a national health insurance scheme to

complement or replace existing patchwork

What’s Likely to be Done?

Not very much on a national level, yet, though universal coverage for children may be in sight

Promising, but uneven, action at state level— “mosaic approach” is most common: fill in picture with separate pieces targeted to distinct populations

Affordability remains a crucial impediment

Local eco-systems will remain key

If We Do Nothing. . .

Growing strains on public providers Default public policy to remain cost-shifting in

many/most markets Uneven burden by -communities -provider types -service lines “Deserving kids” vs. others Economics disparities are at the root of much of

the contemporary disparity concern

The Widening Rift. . .

A widening rift in access is inevitable among the have, the have-little, and the have-not

No likelihood of broad gauge, near term response

Eco-systems will adapt but stress and distress will become more evident on all parties