2
Context for Community Effects: Uninsurance and the Financing and Delivery of Health Services

There is no guarantee that uninsured persons will be able to obtain the health care that they need and no guarantee that if they do get care, it will be adequate or affordable. Responsibility for financing and providing health care to uninsured persons in the United States is fragmented and ill-defined, to the extent that this responsibility exists at all. Many of the Committee’s hypothesized effects of uninsurance on communities stem from the structure of health care finance and the patterns of service provision for insured and uninsured Americans that have emerged over the past half-century. The current structure of safety net and non-safety net arrangements, along with the mix of public and private funding sources, was not envisioned or designed as an integrated system; rather, it has resulted from the aggregation, over time, of multiple initiatives and developments in both the private and the public sectors. Because the organization and delivery of care are closely linked to health insurance, the health care needs of persons who lack health insurance have been of secondary interest, often only as afterthoughts in the development of public policy.

In this chapter, the Committee describes the ad hoc nature of health care financing and services for the more than 41 million uninsured Americans. This information is drawn from both descriptive and analytic, empirical research sources. It frames the discussions in subsequent chapters of pathways through which community uninsurance is hypothesized to affect health care institutions, local economies, and population health. The chapter also documents the magnitude and distribution among providers of uncompensated care to the uninsured and considers who, if anyone, is responsible for providing that care.

The chapter is divided into four sections. The first section gives a historical account of the development of the current programs and arrangements for financ-



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A Shared Destiny: Community Effects of Uninsurance 2 Context for Community Effects: Uninsurance and the Financing and Delivery of Health Services There is no guarantee that uninsured persons will be able to obtain the health care that they need and no guarantee that if they do get care, it will be adequate or affordable. Responsibility for financing and providing health care to uninsured persons in the United States is fragmented and ill-defined, to the extent that this responsibility exists at all. Many of the Committee’s hypothesized effects of uninsurance on communities stem from the structure of health care finance and the patterns of service provision for insured and uninsured Americans that have emerged over the past half-century. The current structure of safety net and non-safety net arrangements, along with the mix of public and private funding sources, was not envisioned or designed as an integrated system; rather, it has resulted from the aggregation, over time, of multiple initiatives and developments in both the private and the public sectors. Because the organization and delivery of care are closely linked to health insurance, the health care needs of persons who lack health insurance have been of secondary interest, often only as afterthoughts in the development of public policy. In this chapter, the Committee describes the ad hoc nature of health care financing and services for the more than 41 million uninsured Americans. This information is drawn from both descriptive and analytic, empirical research sources. It frames the discussions in subsequent chapters of pathways through which community uninsurance is hypothesized to affect health care institutions, local economies, and population health. The chapter also documents the magnitude and distribution among providers of uncompensated care to the uninsured and considers who, if anyone, is responsible for providing that care. The chapter is divided into four sections. The first section gives a historical account of the development of the current programs and arrangements for financ-

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A Shared Destiny: Community Effects of Uninsurance ing and providing health care to those without the means to pay (the “medically indigent”), including people without health insurance. The second and third sections describe the current mix of public and private financing and delivery arrangements involved in caring for uninsured persons, including the roles of government, health care institutions and professionals, and philanthropies and the issue of shifting costs to, or getting subsidies from, private payers (insurers and employers). The fourth section is a summary of what is known and what remains to be learned about how the present arrangements for financing and providing health care generally, and uninsured care in particular, have made uninsurance a critical and destabilizing factor in local health care markets and community economies today. Readers who are familiar with this historical background and policy context may want to turn immediately to the fourth section, which identifies research questions and data needs and then to Chapters 3 through 6, which provide the Committee’s findings and conclusions regarding community effects. HISTORICAL AND ORGANIZATIONAL CONTEXT OF HEALTH CARE FOR UNINSURED AMERICANS Over the past 25 years, federal and state policies to control health care costs and an increasingly competitive private market for health care services and coverage have constrained public payer and commercial reimbursement rates for care. As a result, there has been an erosion of the previous level of public support and private cross-subsidy for the uncompensated care costs associated with providing health services to uninsured persons. The effects of this erosion have been felt more strongly in communities with large or growing uninsured populations and by providers (e.g., public hospitals) that serve a high number or proportion of uninsured persons. As health insurance has become more central both as a means to access care and to the support of health care providers and institutions, the presence of sizable uninsured populations in communities has become a common explanation for, or the most obvious proximal cause of, health system failings and inefficiencies. Understanding why and how this has happened requires some appreciation of the development of the present public and private structures for financing health services. This historical context also aids an objective appraisal of evidence as to what health system and community-wide effects can validly be attributed to local uninsured rates rather than to other aspects of the overall structure of health care finance. The public–private amalgam of health insurance mechanisms and the mixed delivery system of private not-for-profit, private for-profit, and public health care institutions and services are a legacy of America’s particular history and notions of the public good. Over the past century in the United States, the concurrent development of private and public approaches to financing health care (and the

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A Shared Destiny: Community Effects of Uninsurance tension between them) have given shape to American health care services and institutions (Starr, 1982; Stevens, 1989). The well-documented story of financing for hospitals illuminates the growing importance over time of health insurance as a revenue source for health care providers, the backdrop to the emergence of uninsurance as a health policy issue. Since the 1940s, hospitals have become increasingly reliant on revenues from patients to support their budgets and the financial margins on which their survival and development depend (Stevens, 1989). As health care costs have risen and coverage has become increasingly important for access to care by individuals and families, the presence of a sizable uninsured population has meant not only less access for uninsured persons but also the loss of potential revenues for health care providers. This section briefly traces the history of uninsurance in the context of changes in health care financing and delivery. The discussion is divided into three parts, following a typology proposed by Lynn Etheredge that includes an era in which health insurance became common (his era of fee-for-service reimbursement), an era of public regulation of pricing, and an era of managed care and market incentives (Etheredge, 2000). The Rise of Health Insurance Before the advent of Medicare and Medicaid in the mid-1960s, persons without the means to pay for their care relied for the most part on the charity of individual physicians, hospitals, and clinics in their communities. In the nineteenth century and into the early twentieth century, hospital dispensaries and public hospitals were important locations where medically indigent patients could obtain medical care, while patients with the means to hire physicians were treated in their homes. These practices reinforced a two-tier approach to medical care that was firmly established by the mid-1800s (Rosenberg, 1987). During the first three decades of the twentieth century, profound changes in biomedical science and health professions education transformed hospitals into sites of care for middle-class persons, losing the stigma of the almshouse. The development of the new hospital and new standards of practice for providers brought higher prices for health care (Stevens, 1989). The financial consequences of paying for health care in hospitals became an issue for the middle class. In response, a variety of private health insurance plans were devised, some adapted from voluntary “sick funds” organized by immigrant benefit societies, fraternal orders, and unions. Others, such as Blue Cross, were newly created arrangements for individuals to pool their risk of incurring major hospital expenses through modest monthly payments that would relieve the individuals of further financial obligations should hospitalization be needed (Starr, 1982). Economic disparities in health services utilization among various income groups, documented by the Committee on the Costs of Medical Care in a series of studies between 1928 and 1931, were lessened by the 1950s, reflecting the expansion of health insurance more broadly among the population (Starr, 1982; Andersen and Anderson, 1999).

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A Shared Destiny: Community Effects of Uninsurance Enrollment in private health insurance plans expanded rapidly during the 1940s and 1950s, aided by workplace benefits and favorable federal tax treatment (Starr, 1982; Numbers, 1985; Gabel, 1999). By 1940, half of the states had enacted the legal framework for hospital service-benefit plans. These frameworks authorized state insurance commissioners to review the rates of such plans and also exempted the plans from taxes as charitable organizations. In that year, Blue Cross plans had a total enrollment of more than 6 million people and commercial insurers another 3.7 million subscribers (Starr, 1982). By the early 1950s, enrollment in commercial insurance plans and Blue Cross was comparable. In 1953, 29 percent of Americans were covered by commercial carriers, 27 percent by Blue Cross, and another 7 percent by independent plans, amounting to 63 percent of the U.S. population (Starr, 1982). Enrollment grew rapidly during the 1950s, then more slowly in the early 1960s. As hospitals, physicians, and other providers of care during this era grew to rely on revenues generated from insurance payments, persons without insurance found themselves encountering arrangements for care that depended on public support or charitable donations to cover their unreimbursed expenses or on the ability of providers to cross-subsidize this care with revenues from insured patients. Then, as now, public and private nonprofit hospitals alike were widely considered to be obliged (ethically if not always legally) to provide community benefits, including uncompensated care to patients without the ability to pay, in exchange for their tax-supported or tax-exempt status (Clement et al., 1994; Buchmueller and Feldstein, 1996; Trocchio, 1996; Needleman, 2001). Another source of charitable care came from nonprofit community hospitals’ participation in the federal Hill-Burton hospital construction program, which from the late 1940s through the early 1970s (through a successor program) provided grants, loans, and loan guarantees for building and renovation, particularly in rural areas. Support through this program entailed a legal obligation to serve all community residents without regard to ability to pay and to provide a percentage of the value of their original Hill-Burton grant as uncompensated care (Stevens, 1989).1 A third source was federal vendor payments to the states to partially reimburse the care delivered to medically indigent persons, a predecessor to the Medicaid program (Stevens, 1989). Continued inflation in the costs of health care, however, brought new difficulties for uninsured persons in getting access to care and strained the capacity of these initiatives to accommodate growing volumes and costs of uncompensated care. The passage of the Medicare and Medicaid programs as amendments to the 1   Although bonds issued under the authorities of states and localities to finance the capital construction costs of hospitals (which may be public, nonprofit, or for-profit institutions) are federally tax exempt, this financial privilege does not entail any explicit community service obligation akin to the Hill-Burton requirement.

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A Shared Destiny: Community Effects of Uninsurance Social Security Act in the mid-1960s brought the promise of universal coverage and more stable financial footing for health care providers by filling significant gaps in coverage in the general population (Lewis, 1983; Stevens, 1989). Medicare and Medicaid expanded insurance-based financing for those over 65, the disabled, and single-parent families receiving income assistance. These programs preserved the ability of hospitals to charge and be reimbursed more than the direct costs involved in caring for the insured patient.2 However, because Medicare and Medicaid reimbursed for what were called contractual allowances (negotiated rates) rather than whatever fees a hospital might choose to charge for its services, implementation of these public insurance programs brought with it new concerns on the part of private payers that they would end up cross-subsidizing the unreimbursed expenses of publicly insured patients (Stevens, 1989). The two programs filled some but not all existing gaps in coverage, with Medicare limited to persons at least 65 years of age and with categorical and income limits for Medicaid. Medicare was a nationally uniform program administered initially by Blue Cross and modeled after commercial health insurance plans. A federal entitlement program tied to the Social Security retirement and disability insurance program, Medicare specifically addressed the failure of the private market to supply health insurance to the elderly and the impoverishment of older Americans and their families that followed hospitalizations among this population (Marmor, 2000). Medicaid was enacted in conjunction with Medicare as a joint federal–state program entitling the very poorest Americans, through their eligibility for public assistance, to a broad scope of health care services. There was and continues to be much variation from state to state in the size and characteristics of Medicaid programs. Because Medicare and Medicaid left tens of millions of Americans uninsured, hospitals, physicians, and other providers who treated uninsured patients continued to incur costs that went unreimbursed. In addition to expanding public coverage, efforts were made to meet the needs of uninsured and other medically underserved persons through a combination of dedicated health facilities, health professions education subsidies, and a clearer articulation and enforcement of hospital’s charitable obligations under Hill-Burton. Starting in the mid-1960s, the Office of Economic Opportunity awarded project grants to local community organizations to establish neighborhood health centers as innovative models of comprehensive health care delivery organized around primary care that also recognized the positive contributions of health care to local economic vitality and population health (Sardell, 1988). These neighborhood health centers eventually became community health centers. The National Health Services Corps, begun in the early 1970s, placed new physicians in medically underserved communities (Redman, 1973), and litigation in the early 2   This was true for Medicare more than for Medicaid because, in 1969, Medicaid reimbursement policy was decoupled from Medicare’s guarantee of “reasonable cost”-based reimbursement for hospitals and fee schedules for physicians based on “usual and customary” fees (Stevens and Stevens, 1974).

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A Shared Destiny: Community Effects of Uninsurance 1970s led to the requirement that hospitals explicitly document fulfillment of their Hill-Burton service obligations to medically indigent patients, a significant source of free care through the 1980s, when most Hill-Burton obligations ended (Blumstein, 1986; Stevens, 1989). Federal reimbursement and purchasing policies related to Medicare and Medicaid set the stage for the current state of health care finance and the impact of uninsured patients and uncompensated care on health care institutions (Stevens, 1989). Implementation of Medicare and Medicaid was followed by a rapid rise in health care costs, attributable to greater use of hospital services. Public and private hospitals alike scrambled to secure reimbursement from third-party payers sufficient to keep revenue ahead of expenditures. As one observer of the time period notes. (Stevens, 1989, pp. 318-319): Hospitals of all kinds made remarkable adjustments to changes in their environments in the years following Medicare and Medicaid. Some hospitals became aggressively profit-oriented, closing their emergency rooms and seeking maximum reimbursement rates. Others, seeking to maintain a traditional social role, became increasingly hard pressed… Taxing agencies, like their private counterparts, looked for ways to reduce demand for care by patients who were unable to pay. The dictates of the market seemed all-pervasive. The influence of commercial payment, now joined by the interests of public payers, boosted the transformation of hospitals into vendors of services, with much potentially to be lost financially by caring for uninsured persons. The role of public hospitals themselves was brought into question, as the availability of public financing through the Medicare and Medicaid program was posited to eliminate the need for tax-supported institutions (e.g., urban hospitals supported by local property taxes) to care for medically indigent persons who previously would not be seen by private hospitals or at least argue for the reallocation of public dollars for expanding coverage rather than expanding safety-net facilities (Blendon et al., 1986). Some have argued that, in fact, Medicaid actually fostered fragmentation of the health care system, for example, by not remedying existing racial segregation and segregation of the poor within health care facilities (Stevens, 1989).3 In the 1970s, public hospitals, particularly in urban areas, found themselves with many uninsured patients and inadequate reimbursement for many services, leading to great financial stress. By the early 1970s there were also efforts to constrain the huge increase in hospital expenditures by limiting expansion of Medicaid and by price controls (Etheredge, 2000). The failure of national health insurance proposals meant that Medicaid, with its limited income eligibility standards and frequently inadequate payment rates, marked the limits of greater access for the poor (Stevens, 1989). 3   In contrast to Medicaid, Medicare did promote racial integration in hospitals because, in order to participate in Medicare, hospitals had to agree to care for patients regardless of race.

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A Shared Destiny: Community Effects of Uninsurance Cost Controls Shape the Health Care Marketplace, 1983–1992 The federal government’s reform of Medicare payments for hospital inpatient services from cost-based reimbursement to prospective payment in the early 1980s fundamentally transformed the economic incentives facing hospitals. Prospective payment was intended to standardize the payments made to hospitals all over the country so that reimbursement for an inpatient stay for a patient with a particular diagnosis (categorized under a diagnosis-related group, or DRG) would be tied to the average costs of treating that diagnosis and would be similar for every hospital. It was a response to the rapid increase in health care expenditures and resulting inflation in costs and health insurance premiums that had followed the introduction of Medicare and Medicaid 20 years earlier; Medicare and Medicaid spending increased by an average of 17 percent each year between 1965 and 1982 (Etheredge, 2000). For hospitals, prospective payment exposed the economic differences between insured patients and uninsured patients even more starkly and heightened the importance of maximizing the hospital’s revenues, and its market position, through a variety of adaptive strategies (e.g., altering how its case mix is classified to receive higher reimbursements, earlier discharge of patients, shifting from inpatient admissions to outpatient visits) (Stevens, 1989). Third-party insurers followed Medicare’s lead in setting payment levels for services. Prospective payment under Medicare had different economic impacts in different parts of the country and for different types of hospitals. Some hospitals found prospective payment to be profitable while others, for example public hospitals in large urban areas, lost revenue. With pressures on hospitals and providers to keep their costs low, the cross-subsidy or support of uncompensated care for uninsured patients became more difficult, especially for hospitals that disproportionately served the uninsured (Stevens, 1989). Public and private hospitals, and both nonprofit and for-profit hospitals, competed for patients whose health insurance coverage would yield the highest reimbursement for services and contribute the most to the facility’s revenues. Access to care for vulnerable groups, including the uninsured, was diminished (Stevens, 1989). The federal government has responded to this situation through a series of subsidies and regulations grounded in its financing programs, including the following: supplemental payments through the Medicare and Medicaid programs to hospitals serving a “disproportionate share” of low-income (and presumably higher-cost) program beneficiaries and for graduate medical education (these payments are discussed more fully later in this chapter) and prohibition of “patient dumping,” the refusal to treat or the inappropriate transfer of patients unable to pay for their care, through the Emergency Medical Treatment and Labor Act (EMTALA), the federal law enacted as part of the

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A Shared Destiny: Community Effects of Uninsurance Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA). Structured as a hospital condition of participation in the Medicare program, EMTALA requires all hospitals with emergency departments to screen and stabilize all patients who present themselves for treatment, regardless of financial means or insurance status. Because EMTALA has not included provisions for reimbursing hospitals for the care they provide to uninsured patients, one consequence of the statute has been to make hospital emergency departments the providers of last resort and to place the departments at serious financial risk (Bitterman, 2002). Since 1993: Hospital Margins Down, Number of Uninsured Persons Up Prospective payment has proved unable to constrain costs in the long term (Etheredge, 2000; Aaron, 2002; Altman and Levitt, 2002). First private and then public purchasers have used managed care and selective contracting as ways to reduce their outlays for health services for their enrollees (Rundall et al., 1988; Etheredge, 2002). For example, state Medicaid programs have turned to managed care both to control costs and to provide enrollees in Medicaid with greater access to mainstream health care providers and potentially better integration of the delivery system. As Figure 2.1 shows, acute care, nonfederal hospitals saw their private payer surplus decline significantly over the course of the 1990s, from a high of nearly 12 percent in 1992 to about 5 percent in 2000. Over the same period, Medicare revenues first rose and then began to decline as a percent of Medicare costs. This contrasts with the trend for uncompensated care, which showed little change, while total margins for hospitals at first grew and then declined. There has been an erosion of the capacity of hospitals to cross-subsidize uncompensated care. Figure 2.1 indicates a leveling off of the decline in hospital total margins, starting in 1999, reflecting a new period of growing inflation in the late 1990s in health care costs and health insurance premiums. In 2001, health care spending per capita increased by 10 percent (Strunk et al., 2002). More than half of this growth in total spending is attributable to spending on hospital inpatient and especially outpatient services. About one-third of the increasing spending on hospital services reflected higher payment rates and two-thirds reflected greater utilization of services (Strunk et al., 2002). Strunk and colleagues interpret the higher prices charged by hospitals as the outcome of hospital gains in market power (e.g., negotiating strength with health plans) and the loosening of managed care restrictions. They predict a slowing of growth in health care spending, as privately insured persons respond to increased cost-sharing (higher costs passed through their insurance plan) by dampening their use of services and as health care markets adjust to changes in managed care (Strunk et al., 2002). Although this generation of cost-control efforts met with some success through the mid-to late 1990s, the number of uninsured persons has continued to increase, while remaining a relatively constant proportion of the general population. Health insurance coverage rates had first begun to increase substantially in

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A Shared Destiny: Community Effects of Uninsurance FIGURE 2.1 Hospitals’ total margins, with percent gains or losses by source of payment (private payer, uncompensated care, Medicare), 1991–2000. NOTE: Gains or losses are the difference between the cost of providing care and the payment received. SOURCE: Adapted from Hadley and Holahan, 2003, based on MedPAC, 2002a, pp. 156, 157. the 1940s and 1950s, with the expansion of private and public insurance programs. By 1976, the number of uninsured Americans fell to between 24 million and 25 million (approximately 12 to 13 percent of the population under age 65) before increasing once again (HIAA, 2002). Health insurance has played key roles in facilitating access to care and in securing a revenue stream for health care providers, roles that are rooted in the historical development of a third-party financing approach to paying for personal health services in the United States. The Committee considers the effects of uninsurance upon communities as growing out of the changes over time in the relationship among health insurance coverage, access to care, and the financing of health care services. SAFETY NET SERVICES, PROVIDERS OF LAST RESORT, AND MAINSTREAM HEALTH CARE Finding: Although the health care institutions and practitioners that serve the larger community of insured persons provide most of the

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A Shared Destiny: Community Effects of Uninsurance services that uninsured persons receive, the uninsured rely disproportionately on so-called safety-net providers and arrangements for care. Finding: Rural and urban areas differ in the organization and delivery of care for uninsured persons. In urban areas, multiple tiers of providers and services tend to segregate patients by income level and coverage status, isolating insured patients from the experiences of uninsured patients. In rural areas, insured and uninsured patients may have more in common because a more limited set of providers typically serves all community members and safety-net arrangements tend to be less formal. At minimum, mainstream health care and safety-net arrangements are connected by their shared reliance on public and private financing streams. Finding: Anticipated growth in the number and capacity of publicly supported ambulatory care clinics (under the Consolidated Health Centers program) is expected to be inadequate to meet the needs of the existing, as well as the projected future, number of uninsured persons. A widely held misperception is that there are special programs and public facilities nationwide that give uninsured Americans adequate access to health care (Blendon et al., 1999; IOM, 2001a). This is a comforting but invidious myth. The provision and financing of health care for the uninsured are ill-defined, fragmented, and insufficient (Lewin and Altman, 2000; Hadley, 2002; IOM, 2002a). Perhaps more importantly, the metaphor of a safety net does not highlight the fact that all parts of this “net” are anchored, for better or worse, in the mainstream health care system (see Box 2.1). However, the term safety net has become established in public discourse about health services and other social welfare programs that serve vulnerable populations, including the uninsured. The Committee uses the phrase safety net only as an adjective, to refer to health care facilities and programs that disproportionately serve uninsured persons.4 Local safety-net arrangements commonly include services provided through health departments; federally sponsored clinics (e.g., community, migrant); other independent community, faith-based, or free clinics; hospital outpatient departments; public hospitals; and hospital emergency departments. In certain parts of the country, private hospitals may participate in safety net arrangements (Lewin and Altman, 2000). Like the broader health care market, the breadth and depth of 4   One recent study of changes in the capacity of safety-net services over time operationalized the designation as applying to providers that supplied a high volume or high proportion of services to uninsured persons or whose caseload included a high proportion of uninsured clients (Felt-Lisk et al., 2001).

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A Shared Destiny: Community Effects of Uninsurance BOX 2.1 One Definition of the Health Care Safety Net Certain health care institutions, including public hospitals and academic health centers, community health centers, other clinics, and health departments, because of their explicit missions and prominent roles in serving medically underserved or indigent groups have been labeled “core” safety net institutions. The Institute of Medicine (IOM) Committee on the Changing Market, Managed Care, and the Future Viability of Safety Net Providers, authors of America’s Health Care Safety Net, recognized both the unique role and mission of safety-net providers within communities and the highly variable configurations of safety-net services that exist across the country (Lewin and Altman, 2000, p. 47): The concept of a health care safety net conjures up the image of a tightly woven fabric of federal, state, and local programs stretched across the nation ready to catch those who slip through the health insurance system…. America’s safety net is neither secure nor uniform. Rather, it varies greatly from state to state, community to community…. These variations notwithstanding, most communities can identify a set of hospitals and clinics that by mandate or mission care for a proportionately greater share of poor and uninsured people. This earlier IOM Committee concludes that safety net arrangements are “intact but endangered,” threatened fiscally by a decline in support from public revenues, due particularly to the changes associated with state Medicaid managed care programs, and an increase in demand for services as reflected in an increasing number of uninsured persons nationally. SOURCE: Lewin and Altman, 2000. safety-net services are shaped by the local employment and tax base, the generosity of state Medicaid support, the community’s own history and performance in providing services to vulnerable groups, and the demand for services (Baxter and Mechanic, 1997; Lewin and Altman, 2000). Neither the existence of core safety-net providers nor the volume of care delivered outside formal safety net arrangements guarantees that there will be sufficient or adequate care for uninsured persons. There is considerable unmet need for health care in general in many communities around the United States (IOM, 1988, forthcoming 2003; Bovbjerg et al., 2000b). Despite having distinctive characteristics and being identifiable within communities, safety-net providers and service arrangements may be interrelated with and sometimes part of mainstream health care providers and institutions. This blending of safety-net and mainstream health care services is particularly likely in rural areas and for specialty care in general. There is significant heterogeneity across localities in the financing, function, and scope of safety-net arrangements, depending on factors such as the size of the

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A Shared Destiny: Community Effects of Uninsurance aggregate uncompensated hospital care, physician charity care, and presence of community health centers, low-income workers in cities with a greater safety net capacity to provide charity care are less likely to have an offer of workplace health insurance coverage, although they are just as likely to take up coverage if offered by their employer (Herring, 2001). Community health centers and other federally supported clinics are in a double bind with regard to Medicaid managed care. Because they have grown to rely on Medicaid revenues in lieu of operating grants, they have an incentive to serve patients who are Medicaid beneficiaries. However, when costs of providing care under Medicaid managed care contracts exceed their capitation payments, the centers’ financial condition worsens. Consequently, they have less revenue with which to provide care to uninsured patients (Shi et al., 2001; Rosenbaum et al., 2002). Financial losses and the loss of capacity are likely to diminish access for all health center clients, insured as well as uninsured—for example, pregnant women and young children covered through SCHIP, low-income members of racial and ethnic minority groups, and low-income seniors enrolled in Medicare. When legislation in the late 1980s established special cost-based reimbursement for FQHCs, these centers were able to increase their capacity to serve uninsured clients substantially, by 1.6 million persons between 1989 and 1999 (BPHC, 2001). In 1997 the Balanced Budget Act stipulated that the special FQHC provision be phased out. However, consequent to the Benefits Improvement and Protection Act of 2000 (BIPA), the federal government adopted a prospective payment system for Medicaid managed care contracts with CHCs, based on each center’s cost experience, which is expected to ameliorate some of the adverse effects of managed care contracting for health centers (USGAO, 2001; Schneider, 2002). Private Payers Philanthropy Private charitable contributions play a small but important role in financing health care services for uninsured and other medically indigent individuals. Private nonprofit hospitals and health care networks operated by charitable organizations (e.g., Catholic Health Association members) constitute one type of philanthropic support (Catholic Health Association, 2002). Hospital charity care funds also include the endowments of and relatively small contributions to not-for-profit institutions and community foundations established in the conversion of not-for-profit hospitals and health plans to for-profit status (Grantmakers in Health, 2002b). One estimate puts the total value of private philanthropy at between 1 and 3 percent of hospital revenues, of which only a portion is available for the care of uninsured patients (Davison, 2001). Regional, community-based, and national foundations also play a role in underwriting care to those who are uninsured. For example, the W.K. Kellogg

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A Shared Destiny: Community Effects of Uninsurance BOX 2.10 State, County, and Local Financing of Care for Uninsured Persons Texas In Texas, counties can discharge their duty as provider of last resort by participating in a hospital taxing district (87 counties) that raises funds for indigent care, operating a public hospital (32 counties) or an indigent care program (138 counties), or some combination of these options. Hospital districts levy local property taxes, which account for about one-quarter of the revenue devoted to indigent care, with the remainder financed by the state, out-of-pocket payments, and third-party payers (including Medicaid and Medicare). The state’s Tertiary Care Fund (unclaimed lottery prizes) partially reimburses hospital districts for trauma care provided to residents from outside the district and is received mostly by larger urban districts. Federal Medicaid DSH and Medicare graduate medical education (GME) dollars also support hospital districts—again, often larger urban teaching hospitals. In addition, counties and cities may operate their own public hospitals, without the benefit of a hospital district’s taxing authority or dedicated local tax revenues, and some rural counties operate their own indigent care programs. Texas also has an array of publicly supported safety net arrangements similar to those found in other parts of the country, involving academic health centers, state tuberculosis and psychiatric hospitals, and the criminal justice system (about $270 million spent annually on health care, funded solely by state general revenue because prisoners are ineligible for public coverage). Federal matching and block grants, together with state dollars, support specialty services for uninsured persons as well as for the underinsured, chiefly in the areas of family planning ($65 million annually), substance abuse treatment ($85 million annually), and HIV/AIDS treatment ($56 million annually). Finally, uninsured persons are served by 163 federally qualified health centers (FQHCs), an undetermined number of free clinics, more than 450 rural health clinics, and clinics operated or contracted for by local health departments.1 Colorado With its relatively high 17.8 percent uninsured rate in 1998, the 2.2 million person Denver metropolitan area includes the 500,000 residents of the city and county of Denver as well as five adjacent suburban counties. Financing for services for uninsured residents is more secure in the city and county of Denver and less stable in the suburbs, which are experiencing population growth. In both urban and suburban areas, state Medicaid DSH funds and local funds are critical sources of support for this care. The state finances health care for uninsured persons through the Medicaid DSH program ($174.9 million in 2001), grants for primary and preventive care and for essential community providers ($4.8 million), and the state’s indigent care programs (Denver Indigent Care, University Hospital, and Outstate Medically Indigent Care, $79.6 million altogether), which are also supported through the Medicaid DSH program. The indigent care programs are open to uninsured residents or migrant workers who are either U.S. citizens or legal residents and who meet certain income and assets guidelines (sliding scale for copayments). They reimburse up to 30 percent of costs for a broad range of services delivered by qualified

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A Shared Destiny: Community Effects of Uninsurance providers and are supported by the state’s Medicaid program. During 1999, 150,000 Coloradans participated in the state’s indigent care programs. The city and county of Denver support an integrated set of safety-net arrangements through the Denver Health and Hospitals authority, which includes a hospital, 11 FQHCs, a local health department, and 12 school-based clinics, with coordination of services and information across the system. In 1999, Denver’s hospital authority provided close to 40 percent of all inpatient visits under the state’s indigent care program and more than 40 percent of all indigent care program outpatient visits, delivering about half of all uncompensated care in the larger metropolitan area. The state’s Medicaid DSH program and support from the city or county of Denver are major and essential revenue sources for the authority. In 2000, net revenues came from the Medicaid program (33 percent), private insurers (22 percent), the city (11 percent), and Medicare (10 percent). Other sources (e.g., grants, teaching funds) comprised smaller percentages. The city’s annual payment to Denver Health in recent years has averaged about half of Denver Health’s charity care expenses (not including bad debt, expenses reimbursed through Medicaid DSH, federal operating grants, and revenue from patients). In 1999, Denver contributed $26 million toward Denver Health’s estimated $57 million in uncompensated care expenditures. In addition, Denver Health has cultivated new revenue streams from Medicaid managed care (as a partner in statewide Medicaid managed care contracting through Colorado Access); from contracts to care for state and local prisoners and to provide local indigent care and emergency medical services; and from payments made by SCHIP enrollees and paying patients from outside the combined city and county jurisdiction. Compared with the city of Denver, the suburban counties surrounding it have been less successful in financing care for uninsured persons. Safety-net arrangements include three nonprofit clinic networks at 11 sites (coordinated through the Colorado Community Health Network), county health departments, and private hospitals, with University Hospital as the provider of last resort for inpatient care. Population growth has been more rapid in the suburbs than in the city of Denver itself, and with this growth have come relatively greater numbers of uninsured persons who are ineligible for the indigent care programs (undocumented immigrants). In recent years, University Hospital has accumulated losses that administrators attribute to an increasing load of uninsured patients without a sufficient increase in funding, leading to the rationing of available sources and plans for future cutbacks in the amount of charity care to be given.2 Idaho In Idaho, both the state and the counties finance care for the medically indigent. The state operates a Catastrophic Health Care Cost program that reimburses hospitals for individual patients’ bills greater than $10,000 in a one-year period, drawing on a state general fund and a $4.50 per capita fee assessment on each county. Each county functions as the provider of last resort for residents and operates a Medical Indigency Care Program (MICP), supported by local property taxes. At the discretion of the county commissioners, the local MICP may pay bills for less than $10,000 to reimburse necessary care for eligible county residents who apply and are accepted into the program. The structure of the program, eligibility guide-

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A Shared Destiny: Community Effects of Uninsurance lines, and reimbursement amounts and schedules vary from county to county. Recipients are expected to reimburse the MICP for at least a portion of their covered expenses according to a payment schedule. To enforce this provision, at the time a resident applies to MICP, a lien is placed on the recipient’s real and personal property and future potential insurance benefits that remains until the payback is completed. A survey of 11 Idaho counties finds that between 1995 and 1999, few of the counties spent the full amount that had been budgeted for MICP, limited reimbursement was collected, and there were no foreclosures on property. In 1999, budgets for 10 of these counties ranged between $123,000 and $5.8 million, with expenditures of between 50 and 90 percent and paybacks of between 4 and 53 percent.3 New Mexico In New Mexico, a state with a high uninsured rate (and no state income tax), some care for uninsured persons is covered through County Indigent Fund programs. Although participation is not required, most of New Mexico’s 33 counties take part in the state’s County Indigent Fund program, which finances payments for health care largely through a gross receipts tax. The counties also collect funds and may use their County Indigent Fund program to support county Medicaid (25 percent of County Indigent Fund expenditures overall) and Sole Community Provider (40 percent of expenditures) programs, both of which receive federal matching funds. The eligibility criteria (including residency and documentation of legal immigration status) and benefits vary from county to county and tend to be limited. County indigent hospital and health care boards have administrative oversight of the funds. In state fiscal year 2001, the participating counties collected about $26.3 million and spent about $28.5 million (including funds carried over from previous years), with a median expenditure of about $570,000 and a range in expenditures from $55,000 for De Baca County to $3.8 million for Dona Ana County on the southwestern border and $3.7 million for San Juan County. In addition, six counties finance indigent care outside the County Indigent Fund, drawing for the most part on property taxes and collecting about $46.1 million in 2001. A closer look at one county gives a sense of the balance of funding streams and expenditures. In urban Bernalillo County, for example, which includes the Albuquerque metropolitan area, during state fiscal year 2001 the county collected $1 Foundation’s six-year program of grants to 13 communities through its Community Voices program supports collaborative efforts to expand access to care through expanded insurance coverage (Kellogg Foundation, 2002). Local foundations in California, Rhode Island, New Hampshire, New York, and Kansas have funded programs to expand coverage, both alone and together with national foundations including The Robert Wood Johnson Foundation (Grantmakers in Health, 2002a). One new source of support for regional or statewide charitable health foun-

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A Shared Destiny: Community Effects of Uninsurance million in gross receipts tax to pay providers under its County Indigent Fund. In addition, the county collected $31.4 million in property taxes and $5.1 million in a General Fund Health Care Account, which were applied toward support for the University of New Mexico’s County Medical Center, a county mental health center, health care at the county’s detention denter, and service for the debt on a public health facility bond.4 Indianapolis, Indiana Marion County, Indiana, which is contiguous with the city of Indianapolis, operates a managed care program, Wishard Advantage, that enrolls 20,000 of an estimated 40,000 to 60,000 lower-income uninsured persons (earning less than 200 percent of FPL) living in the county. The municipal Health and Hospital Corporation, which oversees the county health department, the county public hospital (Wishard Memorial Hospital), and affiliated health clinics, began this program in 1997 as a way to improve access to primary and preventive services, reduce inappropriate and often costly utilization of the hospital’s emergency department, and put the public hospital on a more sound financial footing in an increasingly competitive hospital market. The number of uninsured persons in the county was also increasing at the time the program began. Benefits are similar to those offered through Indiana’s Medicaid managed care programs, although enrollees have access only to providers in the Wishard Advantage network (e.g., a physicians group practice affiliated with Indiana University Medical School, Wishard Memorial Hospital, a neighborhood health clinic). The Corporation has the authority to levy property taxes and generates roughly $70 million annually in revenues, of which $56 million supports Wishard Advantage. State and federal dollars through the Medicaid DSH payment amounted to almost $52 million in 1997. Funding is considered stable, given the stable tax rate since 1992 and rising property values.5 1   SOURCE: Fenz, 2000 et al. 2   SOURCES: Matherlee, 2001; Ormond and Lutzky, 2001; Tilly, 2002; State of Texas Comptroller’s Office, 2000. 3   SOURCES: Borden et al, 2001; State of Idaho, 2002. 4   SOURCES: State of New Mexico, 2000, 2002. 5   SOURCES: Bruen et al., 2001; Katz et al, 2001. dations is the conversion of nonprofit health plans to for-profit status (analogous to the conversion of nonprofit hospitals) and the creation of local foundations (Grantmakers in Health, 2002b). In California, not-for-profit health plans converting to for-profit status are required by the state to transfer the not-for-profit’s assets into a charitable foundation (California Wellness Foundation, n.d.). A number of foundations have been created in this way, including The California Wellness Foundation (established in 1992 with the assets from the conversion of

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A Shared Destiny: Community Effects of Uninsurance the Health Net health maintenance organization [HMO]) and two foundations created from the 1996 conversion of Blue Cross of California into WellPoint Health Networks (The California Endowment and the California HealthCare Foundation) (California Endowment, n.d.; California HealthCare Foundation, 2001; California Wellness Foundation, n.d.). These foundations have supported care to the uninsured through operating grants, but some devote the bulk of their funding to research, technical support, and education. The pro bono services of physicians and other health professionals in treating uninsured patients, both within their private practices and at specially established clinics, also fall within the category of philanthropy. The extent of such care provided by physicians has been discussed in a previous section. Privately established free clinics, sponsored variously by faith-based institutions, medical societies, and community coalitions, provide a growing but poorly documented share of services to uninsured persons (Grantmakers in Health, 2002a). A study of changing safety-net capacity in the mid-1990s finds volunteer-staffed free clinics at three of five sites studied (Detroit, Michigan; Columbus, Ohio; and Oklahoma City, Oklahoma) (Felt-Lisk et al., 2001). The clinics have limited hours, are supported by donations, tend to provide primary care and pharmaceuticals for adults, and are often connected with churches. They may be affiliated with local hospitals, but the relationship can be tenuous, with the hospital unwilling to accept referrals. These clinics provide greater access for vulnerable groups, particularly uninsured persons who are ineligible for public coverage (i.e., undocumented immigrants) but are limited in resources and unlikely to be able to sustain continuity of care. Like soup kitchens in church basements for homeless people, the need for and existence of community free clinics point up the inadequacies of local public services and provisions for vulnerable community residents. Third-Party Payers and Cross-Subsidization An earlier section of this chapter describes the public subsidies that reimburse some of the uncompensated care expenditures incurred by uninsured persons. Private sector payers may also contribute to the reimbursement of providers’ uncompensated care costs. This section explores how one might think about such a private “cross” subsidy from commercial or private sector payers (e.g., insurers, employers who sponsor employment-based coverage, and covered workers, whose insurance represents part of their compensation package). The extent of private cross-subsidy of the uninsured has not been systematically investigated. Aside from Massachusetts, where provider surcharges finance a free care pool for hospitals and some clinics (Seifert, 2002), such cross-subsidy is expected to be implicit rather than explicit. There is, however, research literature about physician and hospital pricing policy with regard to the “shifting” of incurred costs from public to private payers that suggests how a similar mechanism for private cross-subsidy of a portion of the unreimbursed costs of the uninsured would work.

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A Shared Destiny: Community Effects of Uninsurance The term cost-shifting has been defined in a number of ways. Some studies consider shifting in a static sense (e.g., price discrimination, when a hospital charges different prices of different payers, without any particular relationship between the different prices). Others, which look at shifting in a dynamic sense (e.g., when the price charged to one payer is higher because a lower price is charged to another payer or because of a shortfall in revenue from the other payer), are more relevant to understanding potential cross-subsidies of uncompensated care (Morrisey, 1996). In the early 1980s, the term described how, after the advent of Medicare prospective payment, hospitals sought to “shift” what they considered unreimbursed expenditures for Medicare patients to private payers by means of higher billed rates for health services (Morrisey, 1994; Clement, 1997– 1998). In the first half of the 1990s, attention focused on cost-shifting from private (managed care contracting for employment-based coverage) to public payers. Changes in hospital margins over time give a rough sense of the extent to which private cross-subsidies affect hospitals’ capacity to absorb uncompensated care expenditures. Figure 2.1 depicts the simultaneous decline in private payer surpluses for hospital payments over the past 10 years with little change in reported (net) uncompensated care and change in hospitals’ financial margins; the trends could be interpreted as evidence that hospitals have actually been able to raise their charges to private payers in order to cover uncompensated care costs. It is difficult to interpret the changes in hospital pricing because published studies have examined individual hospitals, rather than the overall relationship between uncompensated care, uninsured rates, and pricing trends in the hospital services market overall. There is little published evidence about cross-subsidizing uncompensated care among for-profit hospitals. To the extent that such institutions conform to standard economic models of profit maximization, they would be predicted to minimize their provision of uncompensated care (Needleman, 2000; Zwanziger et al., 2000). One analyst argues that there was little or no cross-subsidization from private payers during the 1990s, despite the potential for it, because of “price sensitive employers, aggressive insurers, and excess capacity in the hospital industry,” all of which imply a relative lack of market power on the part of hospitals (Morrisey, 1996). Older data (from the 1980s) yields somewhat more evidence for cross-subsidization among nonprofit hospitals than among for-profit hospitals (Hadley and Feder, 1985; Frank and Salkever, 1991; Morrisey, 1993, 1994; Gruber, 1994; Hadley et al., 1996; Dranove and White, 1998; Needleman, 1999). Hospitals have been less able to shift costs among payers as health services markets have become more competitive (Morrisey, 1993; Bamezai et al., 1999; Keeler et al., 1999). In some circumstances (e.g., California in the 1980s and early 1990s), uncompensated care has declined in response to increased market pressures and to public policy (Gruber, 1994; Rundall et al., 1988; Mann et al., 1995). Instead of shifting costs, hospitals are cutting costs and reducing uncompensated care (Campbell and Ahern, 1993; Gruber, 1994; Zwanziger et al., 1994; Hadley et al., 1996;

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A Shared Destiny: Community Effects of Uninsurance Morrisey, 1996; Dranove and White, 1998). Some analysts argue, however, that the ability to cross-subsidize care remains substantial (Zwanziger et al., 2000). Institutional efforts to reduce private cross-subsidy can result in the transfer of the burden of uncompensated care from private hospitals to public institutions, which has been facilitated by the increasingly competitive market for hospital services and managed care contracting (Morrisey, 1996). As discussed earlier in this chapter, in some urban areas there is evidence that uninsured patients are being even more concentrated at safety-net facilities and that, as a result, there is less opportunity for private cross-subsidy of their care. The closing or ownership conversion to private status of public hospitals, a topic to be taken up in Chapter 3, can effect a reverse transfer, from public to private institutions, depending on local public financing arrangements. Efforts to increase, decrease, or maintain private cross-subsidies may have a particular impact in rural areas. The smaller the provider, the less ability it has to cross-subsidize. Coburn (2002) argues that physicians in private practice are able to provide the 20 to 40 percent of uncompensated care in rural communities that they do because they are supported or subsidized by their community’s hospital. For employers in rural areas, the importance of cross-subsidy is a function of scale. It is a greater burden in small towns, where there are fewer employers across whom to spread the financial burden when it occurs in the form of higher costs for health care and health insurance premiums. As a result, there is a competitive disadvantage that accrues to employers who offer more generous or greater subsidies of their employment-based coverage (Morrisey, 1994). A hospital’s ability to cross-subsidize uncompensated care costs is affected by the percentage of the revenue base to which uncompensated expenses may be shifted. Rural hospitals tend to have a smaller-than-average private payer revenue base because Medicare constitutes a higher-than-average proportion of their payer mix (MedPAC, 2001). Similarly, hospitals that disproportionately serve Medicaid and uninsured patients by definition have a smaller private payer base that could potentially cross-subsidize the care provided to uninsured patients. RESEARCH QUESTIONS 2.1 Local Patterns of Unmet Need and Utilization by Uninsured Persons What are the unmet needs for care of uninsured persons and families? Do they differ geographically both within and among states? Basic to almost all the proposed research in this chapter is the need for reliable and current local estimates of uninsured rates and measures of the dispersion or concentration of uninsured persons within local health services markets and among the providers within a market. Until the late 1990s most estimates of uninsured rates were available only at the national, state, or major metropolitan statistical area (MSA) level, most notably through the U.S. Census Bureau’s March Current

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A Shared Destiny: Community Effects of Uninsurance Population Survey (CPS).14 In recent years, the Health Resources and Services Administration’s State Planning Grant program, together with the State Health Access Data Assistance Center (SHADAC), has facilitated the creation of uninsured rate surveys at the county or regional level within states, although these estimates tend not to be comparable across surveys. Enhanced data collection and coordination of existing surveys are needed, as well as the development of new methods to allow generation of more precise and reliable local uninsured rates and for the comparison of these estimated rates across jurisdictions. A local uninsured rate can be the basis for estimating the unmet need or health services utilization of uninsured persons, but more direct measures are preferable. Programs to provide and pay for uninsured care are often stretched to their resource limits, with existing dollars outstripped by the perceived health needs of this population (Lewin and Altman, 2000; Felt-Lisk et al., 2001; IOM, forthcoming 2003). Evaluative research is needed to understand how uninsurance at a local level influences the organization and delivery of health care. How have communities that have been substantially effective in meeting the needs for health care of uninsured and other underserved populations proceeded, and what financing and services strategies have they employed? 2.2 Public Subsidy of Health Services Delivered to Uninsured Persons What are the sources of public support for care to uninsured persons? How much does each source contribute and how efficiently are the funds allocated? The Committee relies on Hadley and Holahan (2003) for a working set of rough estimates about the extent of public subsidy. More complete and consistent documentation of existing federal, state, and local supports for the provision of care to uninsured persons is needed. The levels of such payments to hospitals alone, for example, are substantial and may even be adequate in total to cover the costs of uncompensated hospital care for those completely without health insurance (Hadley and Holohan, 2003). However, more research is needed to pinpoint administrative barriers and inefficiencies in the allocation of funds that result in inadequate or poorly targeted subsidies for the care of uninsured persons. For example, the formulas used to calculate Medicare and Medicaid DSH payment rates do not take the number of uninsured patients into account. In addition, it is difficult if not impossible to compare the relative amounts spent by states through the Medicaid DSH program because states use a variety of methods to generate their match (e.g., tax revenues, intergovernmental transfers from public hospitals) and report different types of data. 14   Appendix B in the Committee’s first report, Coverage Matters, reviews the major surveys that give estimates of uninsured rates (IOM, 2001a).

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A Shared Destiny: Community Effects of Uninsurance 2.3 Private Subsidy of Care Delivered to Uninsured Persons To what extent does uncompensated care by doctors, hospitals, and other entities support care for uninsured persons? To what degree do private cross-subsidies support the care of uninsured persons? It is widely assumed that private payers (e.g., employers, insurers) and private sector health care providers (e.g., nonprofit hospitals, physician practices) cross-subsidize the costs of care for uninsured patients. However, the size of this subsidy is difficult to estimate and the mechanisms through which this uncompensated care is subsidized are complex and not explicitly addressed or documented in the research literature. To the extent that private cross-subsidies occur, what are the implications for health care costs, for local businesses and employers who offer employment-based coverage, and for economic activity in the community? The literature on hospital cost-shifting presents a useful approach to proposed research on private cross-subsidy. One way to gauge the extent of cross-subsidy, for example, is depicted in Figure 2.1, which compares the contributions of uncompensated care, Medicare margins, and private payer surpluses to hospitals’ total margins over time. A longitudinal analysis of changes in payment-to-cost ratios or prices for each payer to an individual provider, correlated with changes in the provider’s total margin and in the cost of unreimbursed care provided to uninsured persons, would yield more precise information about the amount and sources of private subsidy (Dobson, 2002; Morrissey, 2002). Both quantitative and qualitative studies would likely be needed to tease out the extent of private cross-subsidy, with much regional and market variation related to the market position of both insurers and health care providers (e.g., ability to negotiate discounted charges, anticipated revenue from a hospital’s patient case mix, the amount of hospital revenues across which an uncompensated care burden could be spread). SUMMARY As one historian of health care financing in twentieth-century America has observed, hospitals have proven to be quite efficient in their adaptive responses to changed fiscal incentives but not nearly as efficient in meeting changing public needs for health care (Stevens, 1989). The growth of insurance-based means for financing care, the federal government’s approach to shaping health policy through payment policies, increasing price competition in the market for health services, and erosion of the cross-subsidies afforded by private payer reimbursements for care have meant that persons who lack health coverage are less able than insured persons to gain access to affordable care and to be able to pay for the care that they receive. As a result, health care providers who treat uninsured persons are likely to

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A Shared Destiny: Community Effects of Uninsurance accumulate uncompensated costs that may impair their ability to continue delivering care. Governments, health care practitioners and institutions, philanthropies, and private payers all play a part in serving or paying for the care of uninsured Americans. The implicit subsidies are considerable, and their target efficiency and adequacy are difficult to judge. Ultimately, there is no comprehensive or coordinated approach to caring for uninsured persons. The financial implication of this reality—namely, uncompensated care—sets into motion a number of potential community effects of uninsurance. The growth over the past several decades in the importance of health finance in the U.S. economy and government finances magnifies market distortions and inequities and inefficiencies in the allocation of public resources. Hospital uncompensated care was much easier for both governments and the institutions themselves to address when Medicaid and Medicare together accounted for much less of the national spending on hospital care than the 48 percent that they currently do (Cowan et al., 2001). The DSH payments under those two federal programs, although substantial and essential supports for institutions that are major providers of care to the uninsured, are blunt tools. Mainstream health services delivery and the provision of care to and financing of care for uninsured Americans are fundamentally interrelated. Although these two components of the health care enterprise are often treated as separate entities with distinct constituencies governed by separate policies, they cannot be understood in isolation from one another. This is especially evident when tracing the funding streams that pay for the care the uninsured receive and the impacts on health care institutions and providers locally when the proportion of uninsured residents is relatively high or increasing. Despite the relatively stable proportion of the national population without health insurance over the past two decades, major changes in the financing and organization of health care services in both the public and the private sectors have changed the significance and impact of uninsured populations for health care providers and governments at all levels. The next three chapters examine community health care services and access, social and economic institutions, and population health in conjunction with local uninsurance.