also describes some of the most significant budgetary and other challenges to safety net providers in the late 1990s, including changes in the structure and delivery of Medicaid.

Sources Of Funding For Safety Net Providers

For several decades, safety net providers have helped to increase access to primary and preventive health care for underserved and vulnerable people who experience financial, geographic, or cultural barriers to care. Groups served by safety net providers include uninsured children and adults, homeless families and individuals, migrant farmworkers, adolescents, people who live in rural and frontier areas, residents of public housing, and others (HRSA, 1997a).

Over the past 30 years, the federal government and several states have taken legislative and other steps to build the health care infrastructure supporting safety net providers in underserved areas. Typically, funding for these providers comes from a blend of public and private funding streams that subsidize free or low-cost care. Public sources of funding may include the Medicaid program, federal and state service delivery and research grants, local tax dollars, and state uncompensated care pools. Private sources may include foundations and philanthropic organizations, charities (e.g., hospitals whose missions include serving patients regardless of health insurance coverage or ability to pay), and other sources that are not part of an organized philanthropic funding program (e.g., individual donations).

I worry about the whole collapse of any sort of safety net for families and kids. We have hospitals being converted from not-for-profit to for-profit, which eliminates emergency room obligations. Community health centers are under an enormous squeeze in trying to deal with increasing numbers of uninsured families. Federal and state dollars flowing to local health departments and local providers have decreased, and managed care is taking some Medicaid dollars out of health departments and moving people into different systems. These are complex changes which need to be addressed because they affect people in very real terms on a daily basis.

Patrick Chaulk

Annie E. Casey Foundation, Baltimore, MD

Public Workshop, June 2, 1997

Until recently, cost-shifting allowed many mainstream providers serving the general population to offset the costs of uncompensated care. As purchasers have turned to managed care for cost savings, the cross-subsidies and excess revenue sources that could support uncompensated care are disappearing. Purchasers have been negotiating deep discounts in contracts with mainstream hospitals and group practices, forcing those who formerly provided care for uninsured individuals to refer these patients to safety net providers. Uncompensated care costs are becoming more concentrated among fewer hospitals and other traditional safety net providers, and there also is a significant increase in the amount of uncompensated care provided by individual physicians (Cunningham and Ha, 1997).

Table 4.1 presents the main sources of public funding for safety net providers up to 1996. These figures represent total federal funding amounts; matching funds from the states and age-specific breakdowns were not available.

After Medicaid, discussed in Chapter 5, the largest source of funding in the past has been Disproportionate Share Hospital (DSH) payments. Because of concerns that DSH funds were not all being used to provide care for uninsured and low-income individuals, these payments were significantly reduced by the Balanced Budget Act of 1997.

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