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OCR for page 1
EQUITABLE FINANCING OF AIDS AND OTHER HIV-RELATED HEALTH CARE
MEETING SUMMARY
The rapid growth of AIDS cases represents not only human tragedy
but a substantial added financial burden on a health care system in
which rising expenditures are already a concern. The financing of
care for those infected with the human immunodeficiency virus (HIV)
raises public policy questions of great urgency.
What is an appropriate standard of care for those infected, and
how much will it cost to provide it?
What is a fair distribution of the cost? What shares would be
borne by patients and their families out-of-pocket, by private and
public third-party payers, by state and local governments, by health
care providers in the form of uncompensated care, and by private
charity?
How can a fair distribution be achieved? What policies will
foster an orderly division of responsibilities among payers and
providers, private and public, so the needs of patients infected with
HIV can be met without jeopardizing the welfare of others in the
system?
Should such policies include special treatment of HIV patients on
the grounds of special needs, or does special treatment constitute
unfair discrimination against other equally deserving groups?
On February 10 and 11, 1988, at the request of the Health Care
Financing Administration, a meeting was convened by the Institute of
Medicine. The purpose was to bring together people from the private
and public sectors to explore HIV-related financing issues
informally. It was hoped that such discussion would increase
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understanding and facilitate future collaboration in coping with this
complex social problem.
Because the meeting was intended to be exploratory, no set of
options or program of action was expected to result. However, the
meeting's sponsors consider it worthwhile to issue a summary of the
"sense of the meeting," committing to writing the areas of agreement
and disagreement that emerged in the discussion.
HIV Financing in Perspective
Meeting participants agreed on the need to place the financing of
HIV-related care in the context of total expenditures on personal
health care. However, the information with which to do this is
limited.
Widespread HIV infection is so relatively new that its full
natural history is not yet known. Surveillance data tracks only
cases that meet official definition of AIDS; there is no firm data on
the number and distribution of people who have other HIV-related
conditions or who are seropositive (carry antibodies to HIV) but
asymptomatic. Most information on the cost of care covers AIDS only
and is based on studies that are small and geographically specific.
These studies usually emphasize hospital costs, providing little or
no information on out-of-hospital care and medications, and suffer
from measurement problems even for the types of care included. Cost
estimates do not include the value of the many hours of patient care
provided by volunteers--care that would otherwise have to be provided
by paid health care workers.
It was agreed that the early estimate of the lifetime cost per
AIDS case ($147,000) was too high. Current lifetime costs per case
were believed to be in the range of $60,000; for l9gl, a reasonable
range was $80,000 to $90,000, with the caveat that there is an
—2—
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enormous margin for error in these figures. Estimates of costs as a
percentage of total personal health care expenditures based on CDC
epidemiological projections yield relatively small figures, about 0.3
percent in 1987, rising to 1.4 percent in 1991. But again, this
includes only AIDS cases, not other HIV-related morbidity, and there
is an enormous margin of error.
Meeting participants emphasized that a national average figure
understates the impact of the epidemic, because the geographic
concentration of cases has created very difficult adjustment problems
in high incidence areas. Also, there are less quantifiable social
costs of care: the cost of overcoming the reluctance of providers to
care for HIV patients; the stress that dealing with a terminal,
infectious disease pi aces on providers who do accept the burden; the
disproportionate impact of HIV infection on minorities; and the cost
of finding ways to reach and handle difficult patients such as
intravenous drug users.
Better information about the incidence and prevalence of
HIV-related conditions and the cost of treatment was deemed
essential. There was discussion of efforts by entities such as the
National Center for Health Services Research, the Health Care
Financing Administration, the Centers for Disease Control,
philanthropic foundations, and private insurance organizations to
develop more information. Private insurance representatives
emphasized the difficulties in using claims data to ascertain cost of
care, because they are collected for payment purposes, not for
epidemiologic or cost-of-disease studies. Claims data may also be
inaccurate in reporting AIDS diagnosis. Participants agreed that
coordination of data collection efforts would be desirable. It was
suggested that agreement be reached on a minimum set of cost data and
that collection of such data be linked to trials of new drugs and of
alternative service delivery arrangements. Those projects must
collect utilization information anyway, and might provide a more
—3—
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cost-effective approach to data collection than mounting separate
cost studies.
The Role of Private Insurance
American health care financing is based on private group health
insurance for the employed and public sector coverage for the elderly
and certain categories of the disabled and the poor, supplemented by
a variety of other public and private payment.mechanisms. However,
gaps in the system leave an estimated 37 million Americans with no
public or private insurance, and millions more with inadequate
coverage for a serious illness such as AIDS. Moreover, there is
concern that insurers will respond to the AIDS epidemic by looking
for ways to reduce their exposure to risk: for example, by requiring
blood tests of prospective subscribers and rejecting those who are
seropositive, or by changing marketing strategies or withdrawing
altogether from markets in high incidence areas, or by restructuring
benefit packages to exclude or limit services for AIDS patients.
At this time, employees of large firms are the most likely to
have adequate coverage of out-of-hospital care, prescription drugs,
personal service care, and counseling--all benefits that are
especially important to AIDS patients. Employees of smaller firms
and people outside the labor force who maintain private insurance
coverage usually face stricter limits on coverage and consequent
higher out-of-pocket costs. These increase the likelihood that
patients will exhaust their resources and require public assistance,
and may also encourage the substitution of more expensive covered
services for uncovered ones.
Even comprehensive employment-related coverage may be inadequate
security for a person who becomes too sick to work. Traditionally,
loss of employment often meant loss of group insurance at a time when
a worker would find it difficult to afford or qualify medically for
—4—
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an individual policy. Recent legislation guarantees workers who
leave their jobs the opportunity to continue insurance at lower group
rates for at least 18 months, but some workers may still have
difficulty affording the premiums.
Meeting participants agreed that, as with costs, too little
quantitative information is available about existing patterns of
private insurance financing for HIV-related costs and the responses
of insurers to these costs. However, the consensus of the meeting
was that AIDS insurance claims have not been high enough thus far to
trigger widespread concern or major changes in employment-related
group health insurance plans for larger firms. The overall trend is
for group plans to treat HIV-related illness as they do other serious
health conditions. Subscribers are accepted for coverage without any
special health assessment and services are provided as for other
diseases. If anything, AIDS may be reinforcing a trend toward use of
individualized case management for the seriously ill, with
modification of standard coverage rules possible when it is in the
interest of both patient and insurer (for example, to pay for home
health care as a substitute for inpatient hospital care).
AIDS has had a more severe impact on the market for individual
and small group policies. Some insurers have altered benefits,
changed marketing strategies, or withdrawn from the individually
underwritten market altogether. A particularly controversial issue
has been the use of indicators of HIV risk status to exclude high
risk persons from the common pool. In this market, health risk has
traditionally been assessed on an individual basis. Companies argue
that because insurance is about sharing risk, and not about funding
actual or highly probably expenses, they should be able to use
information about HIV risk status just as they use other health risk
information to decide whether to insure and at what premium. To do
otherwise would be unfair to other policyholders and would expose the
insurer to the risk of bearing a disproportionate share of AIDS
_S _
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expenditures. Critics argue that private health insurance is not
just another commodity and that avoidance of all potential risks
undermines the foundations of the private health insurance system.
They contend that private insurance firms are part of a system whose
goal is fulfillment of a societal obligation to guarantee Americans
access to adequate health care, whatever their financial resources
and whatever role their own behavior played in their illness.
Screening for AIDS--or other health risks--undermines this system,
the critics say.
States have taken various positions on the screening issue;
some regulate the use of HIV tests, others are considering such
regulation, and some states have passed legislation but rescinded it.
Efforts to avoid HIV-related risks were seen as relatively
infrequent in group insurance, and thus not affecting the majority of
the privately insured. But some participants were concerned about
the instances that do occur, on the grounds that they will become
more common in the future as claims rise. They were also concerned
that employers, especially those who self-insure, would have an
incentive to screen out seropositive job applicants to control future
fringe benefit costs (an action that would raise legal issues of
employment discrimination that have not yet been resolved). There
was considerable discussion of the effect of the Federal Employment
and Retirement Income Security Act (ERISA) in limiting the ability of
states to regulate the behavior of self-insuring employers, who now
constitute more than 50 percent of the health insurance market.
Participants recognized that even if there is no erosion in
coverage for those at risk for HIV-related disease, there are many
who already lack access to adequate private coverage. The HIV
epidemic has brought new urgency to the long-standing problem of
securing access to health care for the uninsured.
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State-sponsored risk pools for high risk individuals were
discussed as funding mechanisms for AIDS patients. Such pools offer
basic insurance to people who are otherwise uninsurable, spreading
the cost over all insurers, with or without state subsidization. So
far, enrollment in pools has been limited by their low availability,
high premium costs, and lack of sufficiently broad sources of
financing. ERISA limits a state's ability to require participation
in such pools by employers who self-insure. Participants discussed
the possibility of modifying ERISA to facilitate the development of
risk pools. Methods of financing risk pools that are compatible with
existing law, such as broad-based state taxes, were also discussed.
The Role of Medicaid
As a major source of care for the low-income uninsured, Medicaid
plays a significant role in financing HIV-related care. Although
information is limited, the consensus is that Medicaid's share of
expenditure is increasing.
At the meeting, there was a consensus that the AIDS epidemic has
highlighted, once again, long-standing and well-known problems in the
structure of Medicaid. These problems include eligibility, service
coverage, payment rates, and the impact of rising costs on state
budgets.
To qualify for Medicaid, a person must meet both categorical and
financial requirements. The income and asset limits vary across
states but are low enough so that the applicant must be
impoverished. Certain services must be covered by all states, while
other services are optional. As a result, service coverage also
varies across states. In many states Medicaid coverage of home and
community-based care, supportive social services, counseling, and
personal service care is limited, making it difficult to finance
appropriate care for AIDS patients. However, states can apply for
—7—
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special waivers (Section 2176 Home and Community-Based Waiver) and
design HIV-specific programs if they believe that program alterations
could provide more appropriate care at the same or lower cost. New
Jersey, New Mexico, North Carolina, Illinois, Ohio, and Hawaii have
such programs and other states, including California, are in the
process of introducing them. Furthermore, there are other options
under Medicaid, such as hospice care, case management programs,
incentive payments for heavy-use patients that could be implemented
to better serve persons with AIDS.
Providers have long complained that Medicaid does not pay the
full cost of care. This situation may be more serious for HIV
patients if they are more expensive to treat. Inadequate payment
results in restricted access to services for patients and a higher
burden in uncompensated care for providers. This has been of
particular importance to public hospitals and inner-city teaching
hospitals, which bear a disproportionate share of the burden of care
for the poor.
Variations across states in program eligibility, service
coverage, and payment levels raise equity issues for beneficiaries
and providers. On the other hand, even with greater federal matching
rates, poor states do not have the resources to provide the coverage
that wealthier states may be able to afford. Moreover, the
geographic distribution of those unable to provide for their own
health needs is far from even.
Those infected by HIV are especially concentrated geographic-
ally. The impact on the Medicaid program in the states of highest
incidence has been severe, creating dilemmas of resource allocation
between the needs of those with HIV infection and the needs of the
traditional Medicaid clients. Some discussants questioned whether
Medicaid was an appropriate vehicle for financing HIV-related care,
given the uneven incidence of the disease and their belief that many
—8—
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patients had migrated to high incidence areas in search of a
particular life-style before becoming infected, or in search of
quality health care after being diagnosed. The concentration of
incidence is clear, the extent of net migration at the current time
or in the future is not clear. There is some recent evidence of
migration of people at high risk or already infected with HIV from
high incidence to low incidence areas.
The Role of Medicare
So far, Medicare plays a small role in financing HIV-related
care, because of the incidence of infection is very low in the
elderly, and patients who are too sick to work rarely live out the
waiting period for qualification on disability grounds.!/ This
situation could change if new treatments such as AZT prolong life or
if an increasing prevalence of disease occurs among those near or
over 65 years of age.
It could also change if the waiting period is eliminated for AIDS
patients or for all the permanently disabled. Meeting participants
discussed the fact that Medicare is a national program and would
therefore have certain advantages over Medicaid in spreading the
burden of the disease on a broader basis and achieving similar
treatment of AIDS patients wherever they are. On the other hand,
eliminating the waiting period only for AIDS patients would be
expensive and would raise serious questions of fairness to those
suffering from other disabling conditions; the costs of eliminating
the waiting period for all the permanently disabled would be very
high indeed.
1/ Five months of eligibility are required for disability income
and 24 additional months for Medicare eligibility.
_9_
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Moreover, Medicare emphasizes medical care for acute episodes of
illness and requires out-of-pocket payments; thus it would still
leave many of the costs of HIV-related care uncovered.
The Role of State and Local Government and Private Charitable and
Voluntary Organizations
The existing financing system leaves a considerable role for
state and local governments in assisting those with no other
resources. Public hospitals, especially, depend on local government
financing and in high incidence areas have been hard hit by the cost
of care for indigent AIDS patients. Meeting participants discussed
the great strain that HIV is putting on state and local governments,
certain private hospitals, and charitable and volunteer organizations
in areas of high incidence.
Conclusions
There was agreement that people with HIV-related conditions
should be able to receive appropriate care and that somehow the
financing should be available to make this possible.
There was agreement that "appropriate" care does not mean
"unlimited," and that it is Important to encourage the development of
a cost-effective standard of care, using case management as a tool
and emphasizing out-of-hospital care.
There was agreement that radical restructuring of the health care
financing system as a whole, or even of individual parts of it such
as Medicaid and Medicare, is unlikely to be feasible in the immediate
future, therefore, it is necessary to look for methods of adapting
the existing system in incremental ways to meet the AIDS challenge.
There was agreement that the financing of care for HIV-related
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conditions is a responsibility to be shared by the public and private
sector.
In discussing the division of responsibility, participants
distinguished between people in the work force, with reasonable
financial resources, and those out of the work force and/or with
extremely limited resources (for example, most intravenous drug
abusers). For the first group, most meeting participants considered
it worthwhile to explore possibilities for increasing the
availability of affordable coverage and maintaining private coverage
throughout the duration of illness. The range of possibilities
discussed included public subsidies for private insurance premiums,
mandated employer-provided coverage, risk pools, and changes in
public programs that would allow them to function as "stop-loss" or
Catastrophic coverage for the privately insured.
State-sponsored risk pools received the most attention. High
premium cost, ERISA regulations, and the incentives for employers to
cease providing benefits and consumers to wait until they are at high
risk to purchase insurance were recognized as major obstacles to be
overcome in the development of risk pools as a solution to the
problems of the high risk uninsured.
Meeting participants agreed that the care of those out of the
work force is almost inevitably a public responsibility. For this
group, the challenge is to explore possibilities for financing needed
care without straining existing public programs too far.
Possibilities discussed included increased use of Medicaid waivers,
other options such as hospice care and case management programs,
elimination of the Medicare waiting period, and special "impact
grants" to state Medicaid programs or directly to state and local
governments in areas of high incidence. Public support for volunteer
and other private efforts was seen as important.
-11-
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There was agreement that, although there is a special stigma
attached to HIV-related illness, the physical suffering and financial
burdens are not unique; they are experienced by many of those who
suffer from other serious health conditions. Therefore, fairness
across diseases is an important consideration in the development of
policies for the financing of HIV-related care.
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Representative terms from entire chapter:
private insurance
