private insurers (ProPAC, 1992). A substantial number of providers have limited their participation or have not participated at all because of the lower reimbursement levels. Some safety net providers and health care systems argue that they have already absorbed as many Medicaid patients as they can without disturbing the balance of payments from other sources.
Movement of Medicaid enrollees into managed care may begin to increase provider participation and availability. As health plans begin to compete for market share by enrolling Medicaid beneficiaries into capitated programs and as more providers become part of Medicaid managed care plans or networks, more providers will be available to see Medicaid patients. However, unless managed care plans also address nonfinancial barriers, such as transportation, language translation, and child care services, access may continue to be difficult for Medicaid enrollees (Lipson, 1997).
The reduction of Disproportionate Share Hospitals (DSH) funding in the Balanced Budget Act of 1997 could have an independent impact on hospitals that serve relatively large numbers of Medicaid and uninsured patients. Congress capped DSH payments at 12 percent of Medicaid program expenditures in 1991. In the Balanced Budget Act of 1997, future federal DSH funding was reduced by a projected $10 billion.
DSH funds were intended to offset the costs to providers who served a disproportionate share of low-income and uninsured individuals. However, some states used the DSH funding to substitute for other state expenditures through intergovernmental transfers and other methods (Holahan et al., 1997). Only about two-thirds of the funding reached safety net hospitals (Coughlin and Liska, 1997).
The impact of changes in DSH are already visible as safety net providers react to Medicaid managed care and market pressures by trying to become more competitive (Baxter and Mechanic, 1997). Some health plans that are new to the Medicaid market have underestimated the need for expanded services such as case management, language translation, and outreach efforts that are traditionally handled by safety net providers. Thus, they have sought partnerships with community-based providers who know the Medicaid populations and are experienced in providing expanded services. Some community-based providers are entering into partnerships with Medicaid-contracting health plans, and others are developing their own managed care plans (Lipson, 1997).
Why do states expand their Medicaid programs? They expand them to poor kids because they know that health insurance matters. It is clear from the Medicaid experience that differentials in access to care between children with Medicaid and children who are uninsured have been markedly changed, in that private patients and Medicaid patients access the health care system in very comparable ways. The uninsured are still lagging considerably behind.
Kaiser Commission on the Future of Medicaid, Washington, DC
Public Workshop, June 2, 1997
Some studies have shown that children with Medicaid coverage have access to health care comparable to that for children who are privately insured (Overpeck and Kotch, 1995; St. Peter et al., 1992). However, access to care varies significantly from community to community (Baxter and Mechanic, 1997), making it difficult to generalize from these studies. Moreover, many studies of low-income