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SUMMARY Background In the summer of 1996, the Robert Wood Johnson Foundation asked the National Academy of Sciences to form a committee to examine the extent of health insurance coverage for children and to analyze evidence of the relationship between health insurance coverage and children's access to health care. The committee was asked to focus on safety net providers such as community health centers and children's hospitals that traditionally have provided care for uninsured children and their families, to examine trends affecting these providers, and to evaluate the potential effects of those trends on children's access to health care. Approach To The Study The study was a joint effort between the Division of Health Care Services of the Institute of Medicine and the Board on Children, Youth, and Families of the Institute of Medicine and the Commission on Behavioral and Social Sciences and Education, which is part of the National Research Council. The Board on Health Care Services and the Board on Children, Youth, and Families approved the proposal for the study and received regular updates on its progress and activities from the Institute of Medicine study staff. Nominations for potential committee members were sought from a wide range of sources, including Boards, members, and staff of the Institute of Medicine; national professional organizations; federal agencies; private policy research organizations; foundations; and other groups. The Committee on Children, Health Insurance, and Access to Care met four times between March 1997 and January 1998. The committee included 14 individuals with expertise in health care financing and delivery, private indemnity insurance, managed care, Medicaid, and other public programs; health care delivery, both primary and specialty care for children and adults; health care policy; legislative policy, regulation, health law, and health economics; health services research; and epidemiology. The committee convened a public workshop in June 1997 in Washington, D.C. In addition, a liaison panel was formed with nearly 200 representatives of state and federal government, national organizations, health care providers, and other groups. Members of the liaison panel attended the workshop and also submitted written statements for the committee's consideration. Because of their different backgrounds and different views about health insurance, the committee members began their deliberations by developing a unifying set of beliefs about health insurance. The
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committee members agreed that a variety of strategies could be used to expand children's health insurance coverage, with funds for those strategies coming from several possible sources: federal and state budgets, employers, families, health plans, insurers, and communities. After discussion, they agreed that the ultimate goal of health insurance is to provide access to coordinated, efficient, and effective care and services when needed for all American children, including those who have preventable illnesses and injuries as well as those with chronic conditions and other special health care needs. The timing of this study presented unusual challenges. During the months when the committee was meeting, children's health insurance took on national prominence as both political parties and the Clinton Administration presented a variety of proposals that were widely discussed by Congress, state policymakers, national professional organizations, the media, and the general public. Among the proposals were Medicaid expansions, block grants, vouchers, refundable tax credits for families, a tax credit for all children, family Medical Savings Accounts, and a new Children's Health Trust Fund. It was unclear what, if any, national legislative approach would be taken until Congress passed the Balanced Budget Act of 1997 in August, with its provisions for the State Children's Health Insurance Program (SCHIP). The structure of the SCHIP legislation reflected the diversity of opinions about insurance strategies. Under SCHIP, states may choose to expand Medicaid, to design or expand state-sponsored or private programs, or to use a combination of strategies to improve insurance coverage for uninsured, low-income children. The committee began the study with a decision to take an evidence-based approach to its examination of the relationship between health insurance and access to care. With the rapid rate of ongoing change in the health care insurance and delivery picture for children, the committee later decided to supplement the review of scientific and empirical evidence with an analysis of health care trends that are likely to affect the implementation of new children's insurance programs. Key sources of information included the following: analyses of the Current Population Survey conducted by the Employee Benefits Research Institute especially for this study; health services research findings published in peer-reviewed journals; publicly available descriptions of federal and state programs, and research findings and public statements by federal and state agencies; published materials and public statements submitted to the committee by national organizations; policy analyses, reports, newsletters, and news analyses by private organizations; published reports of philanthropic organizations, including the Annie E. Casey Foundation, the Kaiser Commission on the Future of Medicaid, the David and Lucile Packard Foundation, and the Robert Wood Johnson Foundation; and reports published by the Institute of Medicine and the National Research Council. The committee's goal for this report was to draw a general set of conclusions about ways to help improve children's access to care that would apply to a variety of public and private insurance programs. The committee hopes this report will help to improve the evidence base for children's health and children's health insurance efforts and for efforts to improve the quality of children's health care. The committee's specific concerns about the need for data to evaluate the SCHIP program and its recommendations for designing a system of accountability for SCHIP are presented in a companion report entitled Systems of Accountability: Implementing Children's Health Insurance Programs (IOM, 1998). Trends In Health Insurance Coverage For Children The majority of American children have private insurance through their parents' employers. Over the past decade, the rates of employer-based coverage for children have been declining. With increasing
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health care costs, employers have been shifting a greater proportion of the costs of dependent coverage to their employees. Many working parents have low-wage jobs with small businesses that do not pay for their insurance coverage, and there are very few affordable insurance products for dependent coverage in the individual insurance market. The declining rates in employer-based coverage have been partially offset by increases in Medicaid enrollment. Due to changes associated with welfare reform, however, Medicaid enrollment may begin to decrease. If these trends continue, the number of uninsured children is likely to continue to increase. More than 11 million American children are uninsured. Most uninsured children live in families with working parents. Many are not eligible for Medicaid because their parents tend to work in low-wage jobs for employers that do not offer health insurance, and the parents cannot afford to purchase private insurance on their own. More than 3 million children nationally are eligible for Medicaid but are not enrolled for a variety of reasons. Black and Hispanic children are more likely than white children to lack coverage. Nationally, one out of every six black children and one out of every four Hispanic children are uninsured, and one out of ten white children is uninsured. State and regional variations in coverage rates are significant, in part because of differences in Medicaid coverage options for children used by each state, differences in state-sponsored programs and private initiatives, and also because of state and regional economic differences. Under the new SCHIP program, some of these coverage patterns will begin to change. Health Insurance And Access To Care After reviewing evidence about financial and nonfinancial barriers to health care access, the committee has determined that insurance coverage is the major determinant of whether children have access to health care. This determination is based on the finding that is consistent across many studies: compared with children who have insurance coverage, uninsured children have many unmet health care needs. They are more likely to be sick as newborns, less likely to be immunized as preschoolers, less likely to receive medical treatment when they are injured, and less likely to receive treatment for illnesses such as acute or recurrent ear infections, asthma, and tooth decay. Access to health care can influence children's physical and emotional growth, development, and overall health and well-being. Untreated illnesses and injuries can have long-term—even lifelong—consequences. For example, untreated ear infections can lead to hearing loss or deafness. Children who are unable to hear well can have trouble performing well in school and trouble interacting normally with their families and friends. Language or other developmental delays due to untreated neurological problems also can frustrate normal development and social interactions. Uninsured children are the least likely members of society to have routine access to a physician. Without a regular source of care, low-income children are more likely to use publicly funded clinics for standard preventive services such as immunizations and are more likely to use emergency rooms for care for acute illnesses. Some aspects of the health care system also can create barriers to access, particularly the shortages of providers to serve low-income groups, lack of cultural sensitivity, and inconvenient scheduling. Although children who are uninsured have less access to care, the presence of insurance alone will not eliminate all of the barriers to accessing appropriate health care services. Children are dependent on their parents to identify problems and seek treatment, and even insured and responsible parents may delay seeking care because of the cost of the out-of-pocket expenses or because it is difficult or inconvenient to schedule appointments. Delays in ambulatory care because of cost may result in diagnosis or treatment later in the course of illness or disease, when treatment may be more complex and more expensive.
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Safety Net Providers Safety net providers include those hospitals, clinics, community health centers, public health departments, school-based health centers, individual practitioners, and others who provide health care for uninsured and underinsured adults and children. These safety net providers are funded by the Medicaid and Medicare programs, Disproportionate Share Hospital (DSH) payments, the Maternal and Child Health Care Services Block Grant, federal research grants, state and local sources, private insurance payments, private donations, and patient payments. Safety net providers and others have also provided care without any direct source of compensation. Until recently, many providers serving the general population could offset the costs of uncompensated care. As purchasers have turned to managed care for cost savings, however, the cross-subsidies and excess revenue sources that could support uncompensated care are shrinking. Purchasers have been negotiating deep discounts in contracts with mainstream hospitals and group practices, forcing many who formerly provided care for the uninsured to refer these patients to safety net providers. At the same time, some safety net providers have been entering into managed care networks so that they can continue to serve the same vulnerable populations or to maintain their financial viability by changing the mix of insured and uninsured patients whom they serve. The mix of providers, sources of financing, and responsibility for care for the uninsured are different in every community. In a market-driven health care system, the impact of providing unreimbursed or partially reimbursed care is profound. No managed care organization will compete to care for uninsured individuals, and government subsidies to care for low-income and uninsured individuals are generally being reduced. Not all safety net providers will be able to make a successful transition to the competitive health care marketplace. Success may be based on the degree to which providers can offer and market strong primary care services, can compete for Medicaid managed care contracts, and can negotiate payment arrangements that not only cover their costs but also contribute to their financial health. Medicaid Medicaid is the largest single health insurance program for American children. The number of children enrolled in Medicaid has nearly doubled since 1985. In 1997, more than 22 million children—one out of every four children—were covered by Medicaid. This increase in Medicaid enrollment has offset the simultaneous decrease in children's insurance coverage through private sources and has significantly reduced the disparities in access to health care for poor children enrolled in Medicaid. For some types of care, such as immunization rates and rates of professional treatment for injuries, access to health care for children with Medicaid coverage is comparable to that for privately insured children. Medicaid has been successful in increasing rates of insurance coverage among children, but millions of children who are eligible for Medicaid have not been enrolled in the program. Because reimbursement rates have been lower than the rates in the private insurance market, provider participation has been lower than would be desirable. In addition, because of provider shortages in medically underserved areas, even children with Medicaid coverage may lack access to a regular source of preventive and acute care. Several shifts in policy and legislation are changing the configuration of the Medicaid program. First, in an attempt to control costs, many states are converting their state programs from fee-for-service to managed care programs, so that the number of children enrolled in Medicaid managed care has increased sharply. Managed care may increase the level of access to preventive services and also may decrease the level of access to needed specialty services for children with special needs. Second, the delinking of welfare payments from automatic Medicaid enrollment may lead to a decrease in the enrollment of Medicaid-eligible children. As more parents leave welfare and earn wages
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that are above the income threshold for Medicaid eligibility, states may consider approaching the insurance problem through the provision of subsidies to families or employers, the use of tax credits, or other strategies. Based on the Medicaid experience with underenrollment, new state-sponsored and private SCHIP programs will have similar problems unless they can improve their outreach, enrollment, and eligibility determination procedures. States also must provide adequate reimbursement rates to maintain and improve provider participation, and quality standards must be enforced for all providers. State And Private Initiatives Even before Congress enacted the State Children's Health Insurance Program (SCHIP), there were only six states without some type of public or private insurance subsidy program for children. In the past decade, states have taken a variety of steps to extend health insurance coverage to low-income children. Some have expanded Medicaid eligibility, some have developed state-sponsored programs which subsidize private coverage, and some have supported privately sponsored programs developed by insurers and health plans. Income and age requirements for Medicaid eligibility, cost per child, the level of cost-sharing, the sources of financing, and Medicaid enrollment strategies vary widely. Most of the state program benefits are provided through contracts with managed care plans and are similar to the benefits offered to most privately insured individuals enrolled in managed care plans. Although most of these programs have not been evaluated systematically, they have reduced the numbers of uninsured children in the United States. The variety of programs suggests that the problem of uninsured children can be approached in many ways. Comparisons of the different approaches could yield helpful information about what strategies and innovations are most effective for outreach and enrollment, cost-sharing, and other components of the programs. Children's Health Care Needs Most children—approximately 70 percent, or about 50 million—are generally healthy. To help them stay healthy, these children need immunizations, regular preventive care, and professional treatment for acute illnesses and injuries. Twenty percent of American children—about 14 million children—have such chronic problems as persistent ear infections, respiratory allergies, asthma, eczema, and skin allergies. These conditions may impose significant limitations on the children's ability to function effectively in school and at home. Children with chronic conditions require more frequent visits to primary care physicians, are more likely to visit emergency rooms, are more likely to need care from specialists, have greater needs for medications, and may also need hospitalizations during acute episodes. Their medical expenses, on average, are two to three times higher than those for the average healthy child. The remaining 10 percent, about 7 million children, have one or more such severe chronic conditions as congenital heart defects, neural tube defects, juvenile diabetes mellitus, sickle cell disease, or human immunodeficiency virus (HIV) infection. This group accounts for 70 to 80 percent of all medical expenditures for children. Some of these children require extensive health care services (e.g., surgical procedures) requiring large expenditures primarily early in life. Others with severe medical conditions may require lifelong, intensive case management from primary care practitioners along with consultations from pediatric subspecialists, as well as services from allied health professionals to maintain or to improve their functioning. Children with special needs typically also have additional, nonmedical needs. These include supplemental or adjunctive therapies; specialized transportation, supplies, and equipment; linkages with
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schools and other community-based organizations; and support for their families, including respite care and assistance with out-of-pocket (noncovered) expenses. The most comprehensive and child-specific package of benefits is Medicaid, which offers a full range of medically necessary care for children, including children with special needs. Insurance coverage for children is variable and fragmented, and many controversial issues remain unresolved. The committee recognizes that health care resources are not unlimited. However, as a matter of principle, the committee believes that all American children should have access to coordinated, efficient, and effective health care, including children who have preventable illnesses and injuries, chronic conditions, or other special health care needs. The State Children's Health Insurance Program (SCHIP) The SCHIP program, enacted under the Balanced Budget Act of 1997, allows states to choose whether Medicaid expansions, state-sponsored programs, or state-private initiatives will be implemented. States may choose a combination of strategies and may implement different programs for different defined populations and regions. The flexibility in SCHIP design appeals to most states because of the opportunity to provide coverage and services in ways that reflect the state's availability of insurance products and providers, geographic distribution of uninsured children, potential sources of financing, and many other factors. The structure of this legislation, with its flexibility and range of options, reflects the variety in current views about the government's role in a predominantly employer-sponsored insurance system. With the new SCHIP programs, states that increase their Medicaid eligibility thresholds and otherwise subsidize coverage for previously uninsured children can raise the rates of insurance coverage and thus reduce the burden of providing uncompensated care among safety net providers. However, in order for SCHIP funds to make significant reductions in the numbers of uninsured children, states must draw down all of the available funds, actively pursue effective outreach and enrollment strategies, and also minimize the risk of replacing existing private coverage. Over the next several years, it will be important to measure the extent to which the new children's health insurance programs alleviate the pressure on other sources of funding for uncompensated care. Unless better data systems are developed, this will be extremely difficult to measure. Thus, the advent of the SCHIP program offers a unique opportunity to track and measure changes in the number of uninsured children and to assess the program's effectiveness from its onset. Lessons learned from the evaluation of the program will have important implications for the likelihood and nature of future insurance expansions. Conclusions From the beginning of their deliberations, the committee members took the position that several strategies potentially could increase the number of insured children and that their task was not to recommend one particular policy option. The committee members agreed throughout their deliberations that the ultimate goal of these strategies is to provide access to coordinated, efficient, effective, and cost-effective health care for all American children, including children who have preventable illnesses and injuries, chronic conditions, or other special health care needs. Based on its review of scientific evidence and analysis of current trends, the committee drew the following conclusions. 1. All children should have health insurance. 2. Public and private insurers should be encouraged to develop affordable products that address
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the specific needs of children, including children with chronic conditions and special health care needs. 3. Nonfinancial barriers to care should be reduced through the provision of assistance with child care and transportation, through the provision of culturally appropriate services, and through the use of information technology. 4. Outreach and enrollment procedures and coordination efforts should be designed so that all programs achieve the highest enrollment possible, particularly when states offer multiple programs with different eligibility requirements. 5. Information generated from children's health care and insurance programs should be designed to be useful in evaluating short-term trends and making program adjustments, and should be made widely available. Reference IOM. 1998. Systems of Accountability: Implementing Children's Health Insurance Programs. Washington, D.C.: National Academy Press.
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