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Keywords:

  • disparities;
  • health policy;
  • uninsured;
  • Medicaid;
  • SCHIP;
  • safety net providers

Abstract

  1. Top of page
  2. Abstract
  3. Introduction
  4. Trends in Private Health Insurance
  5. Trends in Public Health Insurance: Medicaid and State Children's Health Insurance Program
  6. Trends in the Healthcare Safety Net
  7. Looking Forward: Identifying Policy Levers to Reduce Disparities
  8. Acknowledgment
  9. Conflicts of Interest
  10. References

This chapter examines trends in private and public health coverage, as well as implications for vulnerable populations and health disparities. We find that there has been erosion in employment-based health benefits. Both the percentage of employers offering coverage and the percentage of workers with coverage declined in recent years. Those with coverage face eroding benefits and increased cost sharing. Within the public sector, Medicaid enrollment has decreased, with benefits increasingly restricted. Although State Children's Health Insurance Program (SCHIP) enrollment has increased among low-income children, the future of SCHIP remains uncertain. Meeting the healthcare needs of Americans and reducing health disparities requires both the provision of health coverage to all and sufficient comprehensiveness of benefits within private and public programs to meet enrollees' healthcare needs. Our findings suggest that we have a long way to go in reaching these goals.


Introduction

  1. Top of page
  2. Abstract
  3. Introduction
  4. Trends in Private Health Insurance
  5. Trends in Public Health Insurance: Medicaid and State Children's Health Insurance Program
  6. Trends in the Healthcare Safety Net
  7. Looking Forward: Identifying Policy Levers to Reduce Disparities
  8. Acknowledgment
  9. Conflicts of Interest
  10. References

Eliminating health disparities has emerged as a national priority in recent years. Healthy People 20101 named the elimination of health disparities as one of two primary national goals for improving the health of Americans. The Crossing the Quality Chasm report, issued by the Institute of Medicine in 2001, further highlighted the importance of eliminating health disparities to the nation's quality improvement agenda, noting that “the provision of equitable health care that does not vary in quality because of personal characteristics such as gender, ethnicity, geographical location, and socioeconomic status”2 as one of its six priority goals. The 2002 Institute of Medicine report Unequal Treatment provided further traction for public efforts focused on reducing disparities by providing comprehensive documentation of racial/ethnic disparities across a wide range of healthcare settings, such as managed care; public, private, and teaching hospitals; disease areas (e.g., cancer, human immunodeficiency virus, diabetes, cardiovascular disease); and clinical settings, controlling for a robust number of other factors (e.g., socioeconomic status, insurance status, stage of presentation).3 Achieving measurable progress in closing the disparity gap will require mobilizing both private and public programs to ensure access to affordable health insurance for many of the 47 million persons currently without health insurance, and in the interim, to ensure adequate financing of safety net providers who serve those regardless of insurance status or ability to pay for services. This chapter reviews recent trends in private and publicly sponsored health insurance coverage, as well as trends in the healthcare safety net, and assesses their probable effect on disparities. We focus in particular on trends affecting the poor and near poor. The chapter concludes with a discussion of emerging health system changes that may have a significant influence on the eventual success of efforts to reduce health disparities.

Trends in Private Health Insurance

  1. Top of page
  2. Abstract
  3. Introduction
  4. Trends in Private Health Insurance
  5. Trends in Public Health Insurance: Medicaid and State Children's Health Insurance Program
  6. Trends in the Healthcare Safety Net
  7. Looking Forward: Identifying Policy Levers to Reduce Disparities
  8. Acknowledgment
  9. Conflicts of Interest
  10. References

Erosion of Employment-based Insurance

There has been substantial erosion of employment-based health insurance in recent years. Between 2000 and 2007, the cost of providing health benefits doubled while workers' wages and overall inflation increased by only 25% and 21%, respectively (calculated from Fig. 1). Although the growth rate for the cost of providing health benefits decreased between 2003 and 2007, the rate is still double that of workers' earnings. These cost increases have contributed to the erosion of employment-based healthcare coverage, with the percentage of persons under 65 with employment-based coverage falling from 68% to 62% between 2000 and 2006.4 Employment-based benefits continue to be the predominant source of healthcare coverage for most individuals under age 65, but this system has failed to reach almost all of the working poor. According to data from the U.S. Census Bureau's March 2007 Current Population Survey, 82% of the uninsured population were in families headed by full- or part-time workers.4 Among the working poor, only 20% were covered by employment-based benefits in 2006, whereas close to one-half were uninsured (authors' estimates are from the March 2007 Current Population Survey).

image

Figure 1. Increases in health insurance premiums compared to other indicators, 1988–2005.

Source: Claxton G, DiJulio B, Finder B, et al. Employer Health Benefits 2007 Annual Survey. Washington, DC: The Kaiser Family Foundation Health Research and Educational Trust 2007.

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Since 2000, there has also been a decrease in the percentage of small employers' offering health benefits. As a result, the percentage of workers eligible for health benefits through their own employer fell slightly between 2001 and 2005, from 76% to 74%.5 Approximately 65% of uninsured employees worked for employers that did not offer health insurance coverage.6 Another 20% worked for firms that offered insurance, but they were not eligible for the insurance benefit.6 The remaining 15% were offered coverage by their employers but turned it down, with two-thirds of those declining coverage citing cost as the reason.6

Children of working poor families are particularly vulnerable. More than a third of employers reported having higher cost sharing for dependent coverage than employee coverage in both 2003 and 2004,7 possibly explaining a recent decrease in the number of workers electing family coverage, particularly in small firms.7,a Even when they do have coverage, children of working poor families are three times more likely to experience disruptions in coverage and far less likely to have a usual source of health care (89.1%) than nonpoor insured children (96.0%).8

Restructuring of Benefit Packages in Response to Rising Costs

Not only are fewer people eligible for health benefits through their job, but those that do take coverage when it is offered are also paying more for that coverage. Several consecutive years of double-digit growth in premiums that far outpaced workers' growth in earnings have placed significant strains on both employers and employees.9 Employers have responded by shifting some of the additional cost to workers through higher premiums. Premiums for employee-only coverage increased from $28 to $58 per month between 2000 and 2007, a 107% increase, and family coverage premiums increased from $135 to $273 per month, a 102% increase.10 Although increases in premiums have been in proportion to the extra costs faced by employers (i.e., workers have been paying approximately 16% of the premium for employee-only coverage and 28% of the premium for family coverage since 1996), low-wage workers are feeling the additional strain.

In addition to increasing premiums, employers have been raising out-of-pocket expenses for healthcare services through employee cost sharing. Between 2000 and 2007, the percentage of workers in a preferred-provider organization (PPO) with a deductible of at least $500 increased from 14% to 38% (Fig. 2) and the percentage of workers with an office visit copayment of at least $20 increased from 39% to 53% (Fig. 3). Overall, the average deductible among workers with employee-only coverage in a PPO increased from $187 in 2000 to $327 in 2006, an increase of 75%, whereas inflation only increased 17% during this period.

image

Figure 2. Distribution of deductibles for employee-only PPO coverage, 2000–2006 (Exhibit 7.5 Survey Employment 2006).

Source: Claxton G, Gil I, Finder B, et al. Employer Health Benefits: 2006 Annual Survey. Employee Cost sharing, Section 7, Exhibit 7.5. Washington, DC: The Kaiser Family Foundation Health Research and Educational Trust. Available at http://www.kff.org/insurance/7527/upload/7527.pdf. Verified on January 25, 2008.

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image

Figure 3. Distribution of physician office visit copayments, all plan types, 2004–2006 (Figure 7.15 in the 2006 Survey Employment Report).

Source: Claxton G, Gil I, Finder B, et al. Employer Health Benefits: 2006 Annual Survey. Employee Cost sharing, Section 7, Exhibit 7.15. Washington, DC: The Kaiser Family Foundation Health Research and Educational Trust. Available at http://www.kff.org/insurance/7527/upload/7527.pdf. Verified on January 25, 2008.

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Employers have also attempted to control costs through implementation of tiered insurance productsb with accompanying higher copayments or coinsurance.c The underlying thrust of these plans is to limit employer/insurer financial exposure beneath the guise of enhancing consumer decision making and responding to consumer demand for greater choice. Although tiered insurance plans may provide more consumer choice to a certain degree, these choices are often more restrictive than traditional insurance plans.7,d

There has also been a movement toward tiered prescription drug benefits and drug formularies in hopes of controlling expenditures. According to the most recent data available, 89% of employees had a tiered prescription drug benefit in 2005,9 with a trend toward an increasing number of tiers as evident by the 74% of covered workers enrolled in health plans with three or four cost-sharing tiers for prescriptions.9 In 2003, 71% of covered workers were in a plan that used a formulary, compared with 43% in 2000.11 But despite more drug tiers aimed at reducing cost, the average copayment for generic drugs increased faster than inflation.12 Between 2000 and 2006, the average copayment for brand-name (preferred) drugs on the formulary increased from $13 to $24, an 85% increase, whereas the average copayment for nonformulary (nonpreferred) brand-name drugs increased 124% (Fig. 4). Studies have begun documenting the negative effect of increasingly restrictive prescription drug policy on patient access to needed medications.e

image

Figure 4. Average copayment for prescription drugs, 2000–2006 (Exhibit 9.4 2006 Employment Survey).

Source: Claxton G, Gil I, Finder B, et al. Employer Health Benefits: 2006 Annual Survey. Mental Health Benefits, Section 9, Exhibit 9.4. Washington, DC: The Kaiser Family Foundation Health Research and Educational Trust. Available at http://www.kff.org/insurance/7527/upload/7527.pdf. Verified on January 25, 2008.

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Finally, there is also the beginning of a trend toward high-deductible health plans that are often combined with a tax-preferred savings account. About 10% of firms reported offering a high-deductible plan to employees in 2007, up from 4% in 2005.10,13 Though these plans may offer an array of covered services, they extract sufficiently high deductibles from consumers to curb utilization and typically cut the range of benefits covered.14 And although enrollment in high-deductible plans still remains fairly low relative to the size of the insured market, with 5% of covered workers enrolled in one of these plans in 2007, low-income families might be particularly vulnerable to the lure of lower premiums typical of high-deductible plans in the future. Usually, some form of insurance is better than none at all and these plans often provide first-dollar coverage for preventive services. Research has begun to document consumer difficulties. Those in a high-deductible health plan are more likely to report significant medical bill problems or debts and access problems, including not filling prescriptions or skipping medical tests, treatments, or follow-up visits because of cost.15,f

Trends in Public Health Insurance: Medicaid and State Children's Health Insurance Program

  1. Top of page
  2. Abstract
  3. Introduction
  4. Trends in Private Health Insurance
  5. Trends in Public Health Insurance: Medicaid and State Children's Health Insurance Program
  6. Trends in the Healthcare Safety Net
  7. Looking Forward: Identifying Policy Levers to Reduce Disparities
  8. Acknowledgment
  9. Conflicts of Interest
  10. References

Since its establishment in 1965, Medicaid has been a critical mechanism for health insurance coverage among low-income and disabled Americans. Medicaid currently covers 55 million people, including 27 million children, 14 million adults, 6 million seniors, and 8 million persons with disabilities.16 The State Children's Health Insurance Program (SCHIP) covers 6 million additional children who do not qualify for Medicaid. More than one in four children in America relies on Medicaid or SCHIP for health insurance.17 Over the last decade, gains in Medicaid and SCHIP coverage outpaced erosion of employment-based coverage, resulting in substantial declines in the percentage of low-income children who were uninsured.17 Yet rising costs have led to recent restrictions in these programs as well. Below, we summarize recent trends in Medicaid and SCHIP.

Recent Trends in Medicaid

Largely due to the economic downturn and increasing unemployment, all states experienced increases in Medicaid enrollment in 200418 and 2005.19 Although Medicaid enrollment was expected to grow by 3.1% in fiscal year (FY) 2006,19 there was virtually no growth in enrollment in 2006,20 and enrollment declined by 0.5% in FY 2007.21 Total Medicaid spending trends increased between 2000 and 2004 at an average annual rate of 9.5%.22 In FY 2006, Medicaid spending growth fell by 0.2%, the first time that growth declined in the program's history.20 The decline in spending was caused largely by the implementation of the Medicare Part D drug benefit, which shifted prescription drug coverage for dual eligibles from Medicaid to Medicare, and by the reduction in enrollment growth.

Key trends of Medicaid cost-containment strategies between FY 2002 and 2005 are summarized in Figure 5.18 In general, states have responded to these fiscal pressures in four major forms within Medicaid programs:

image

Figure 5. Number of states undertaking new Medicaid cost containment strategies, fiscal year 2002–2006.

Source: Smith V, Ramesh R, Gifford K, Ellis E, Wachino V. The Continuing Medicaid Budget Challenge: State Medicaid Spending Growth and Cost Containment in Fiscal Years 2004 and 2005: Results from a 50-State Survey. Washington, DC: The Henry J. Kaiser Family Foundation; 2004.

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  • 1
    Restricting Medicaid enrollment. Within the requirements of Medicaid statutes, states can restrict eligibility by reducing family income requirements to the federal poverty line (FPL) or by reducing Medicaid eligibility for optional populations. In FY 2004, 19 states reduced or cut eligibility for Medicaid enrollees; in FY 2005, seven states implemented benefit cuts or restrictions and 16 states intended to make cuts or restrictions in benefits for the following year.19
  • 2
    Reducing spending per beneficiary. Reducing the amount of money that each state spends per enrolled beneficiary requires reducing payments to providers or cutting optional services. In FY 2005, all but one state froze Medicaid payment rates and 10 states decreased rates for at least one group of providers (i.e., hospitals, physicians, managed-care organizations, nursing homes)19; seven states cut or restricted benefits, including the reduction of coverage for physician office visits, dental services for both children and adults, and durable medical equipment.19 For FY 2006, 16 states adopted plans to make cuts or restrictions in benefits.
  • 3
    Managing prescription drug benefits. With outpatient prescription drug spending accounting for 10% of Medicaid spending on benefits, managing Medicaid prescription drug benefits is a more aggressive form of cost control.23 By FY 2005, 43 states implemented new pharmacy cost controls,24 with more states developing and implementing preferred drug lists and seeking supplemental rebates.g Cost-sharing requirements have also become more popular: 30 of 37 states in 2005 reported cost sharing for prescription drugs.23
  • 4
    Using waivers to restructure Medicaid benefit packages. States are increasingly restricting enrollment and altering core elements of their programs through waivers, such as Section 1115 waivers,25 which grants the Secretary of Health and Human Services broad authority to waive statutory and regulatory provisions under the Social Security Act, including Medicaid and SCHIP, without statutory change.h Although there are several types of waivers,i Section 1115 waivers have the greatest effect because they are the most comprehensive and allow broad changes in eligibility, benefits, and cost sharing.26 Currently, 27 states and the District of Columbia have approved comprehensive Section 1115 waivers.26Table 1 provides examples of key changes to Medicaid programs implemented through recent waivers.25
Table 1.  Examples of changes to key elements of Medicaid through recent waivers
Waiver featuresImplications
  1. Source: Medicaid Section 1115 Waivers: Current issues. Washington, DC: The Henry J. Kaiser Family Foundation; 2005.

Limited benefits and/or new or increased premiums and/or cost sharingLimits access to coverage and/or care
Potential increase in unmet needs and uncompensated care
Reduces state/federal program costs
Different benefits and cost sharing for different groups within a stateAllows states to “target” benefit packages
Increased administrative complexity
Confusion could dampen participation among people and providers
Enrollment capsEliminates guarantee to coverage
Enrollment based on first-come, first-served system, not income or need
Potential increase in number of uninsured and levels of uncompensated care
Allows states to quickly reduce program costs
Eligibility expansion to adults without dependent childrenAllow states to cover groups excluded from Medicaid under federal law
Size, scope, and implementation limited by availability of state funds and budget neutrality requirements
Coverage and/or care may be limited by enrollment caps, premiums, limited benefits, and/or cost sharing

Declining or flat Medicaid enrollment may be cause for concern. The 0.5% enrollment decline in Medicaid for FY 2007 mentioned earlier was driven primarily by new citizenship documentation requirements that caused significant delays in processing applications.21 Perhaps more importantly, state officials cited the good economy and lower unemployment for reducing enrollment, with 42 states even planning to expand coverage in 2008.21 However, in late 2007, the economy entered a downturn, and economists fear that the economy is either in a recession or on the verge of entering one. The unemployment rate increased from 4.7% in November 2007 to 5% in December 2007.27 Furthermore, as of January 18, 2008, the Dow Jones industrial average had lost roughly 9% of its value. Because of rising concerns over the economy's entering a recession, President Bush and Congress recently implemented a stimulus plan that returned $52 billion in taxes to consumers, and the Federal Reserve slashed the federal funds rate by three-quarters of a percentage point, the largest cut in nearly 24 years.28

Because of the weaker economy, states will not be able to expand Medicaid coverage in the coming years as originally planned. This inability is especially dangerous because higher unemployment will translate into greater demand for Medicaid services at a time when tax revenue collections are down and states are in a precarious position to increase services to the poor.

Deficit Reduction Act of 2005

As with development in employer-sponsored health care, efforts to control healthcare costs translate not only into fewer persons with coverage but also reduced benefits and increased cost sharing among those that do have some form of coverage. Recent legislation has targeted Medicaid spending, which has translated into new benefit limits and cost-sharing burdens for Medicaid enrollees. The Deficit Reduction Act of 2005 (DRA), signed into law on February 8, 2006, includes several changes to the Medicaid program expected to generate net reductions from Medicaid of $4.8 billion over the next 5 years and $26.1 billion over the next 10 years.29

The DRA is historic in that it allows states unprecedented flexibility to reduce Medicaid benefits and institute cost sharing among different eligibility groups.30 States can now charge unlimited premiums and copayments up to 20% of the cost for medical services for beneficiaries (including children) who have a family income of more than 150% of the FPL ($24,900 for a family of three in 2006).29 However, the total premiums and cost sharing are capped at 5% of the family's quarterly or monthly (state's option) income.30 For beneficiaries who have family incomes of between 100% and 150% of the FPL, premiums are still not allowed, but the copayment limits are set at 10% of the cost of medical services and are capped at 5% of the family's quarterly or monthly income.30 Although states cannot impose premiums or cost sharing for certain groups (e.g., children and pregnant women) and for certain services (e.g., preventive services for children, pregnancy-related services, and emergency services), states can now make premiums and copayments “enforceable” by denying or terminating coverage for failure to pay.29 The Congressional Budget Office estimates that 9 million people, half of them children, will be faced with cost sharing for the first time; by 2015, 1.3 million beneficiaries could face premiums ranging from 1%–3% of their family income, resulting in approximately 65,000 beneficiaries' losing coverage.29

The DRA also includes provisions affecting eligibility for several beneficiaries. Effective July 1, 2006, the DRA requires most new applicants and current beneficiaries to document their citizenship.29 Research has shown that increased documentation requirements are a barrier to Medicaid enrollment,31 and the Congressional Budget Office estimates that this documentation provision may result in up to 35,000 beneficiaries' losing Medicaid coverage.29

State Children's Health Insurance Program

One of the major initiatives to expand access to health insurance for low-income children and their parents has been SCHIP, which targets low-income children with family incomes between 100% and 200% of the FPL and provides states with a higher federal match than is available for Medicaid, even if their SCHIP programs are implemented as Medicaid expansions. SCHIP allows states to set income eligibility limits at 200% of the FPL or higher, to expand Medicaid, or to create a separate program. The most important difference between SCHIP and the traditional Medicaid program is that SCHIP is a block grant capped at $40 billion over 10 years (1998–2007) rather than an open-ended entitlement.

SCHIP has had some success in covering low-income children. Between 1996 and 2000, the proportion of near-poor children who were uninsured decreased from 23.3% to 17.5%, representing more than 1 million additional children who received health insurance.32 As of June 2007, 4.4 million low-income children were enrolled in SCHIP.33 Although SCHIP has been successful in expanding coverage for low-income children, it has not significantly helped adults. The rate of uninsured parents with incomes below the FPL increased from 30% in 1994 to 35% in 2001.34 Early momentum to use SCHIP as a springboard to expand coverage to parents of low-income children appears to be stalling, even though states can obtain the higher SCHIP match for such coverage by using SCHIP or Health Insurance Flexibility and Accountability waivers.32

Although 32 states expanded access to their Medicaid and SCHIP programs between July 2006 and January 2008, a recent federal directive issued by the Centers for Medicare and Medicaid Services on August 17, 2007, restricted states from using SCHIP funds to cover children in families with gross incomes of more than 250% of the FPL. The directive currently affects 23 states, including 10 states that passed eligibility expansions but had not obtained federal approval before the directive was issued and 14 states that had implemented coverage expansions above this level but will have to comply with the directive by August 2008. In response to this directive, several states have already scaled back or postponed their plans to expand access or have decided to absorb the full cost of covering children with income above the Centers for Medicare and Medicaid Services limit.35

The future of SCHIP is uncertain.j According to a study of 13 states that together account for almost two-thirds of total SCHIP enrollment,36 every state surveyed, with one exception, has enacted at least one program cut.36 Nearly one-third of states have instituted changes in enrollment policies making it more difficult for families to apply for SCHIP.36 Rushing to finish its work for the year, Congress passed legislation on December 19, 2007, to extend SCHIP at essentially its current level for 15 months. The extension, which will carry the current SCHIP program through March 31, 2009, includes enough additional money to prevent 19 states from exhausting their SCHIP funds in 2008 and having to reduce their programs.k

Trends in the Healthcare Safety Net

  1. Top of page
  2. Abstract
  3. Introduction
  4. Trends in Private Health Insurance
  5. Trends in Public Health Insurance: Medicaid and State Children's Health Insurance Program
  6. Trends in the Healthcare Safety Net
  7. Looking Forward: Identifying Policy Levers to Reduce Disparities
  8. Acknowledgment
  9. Conflicts of Interest
  10. References

The nearly 18% of individuals under age 65 who lack any form of private or public insurance must rely primarily on a patchwork of safety net providers (SNPs) for needed medical care.4 Public financing in this arena funds groups of healthcare providers who care for the uninsured directly, rather than channeling funds into expanding the number of persons with health insurance coverage. The composition of the “safety net” in any given community varies, as does the demand for safety net care (because of the unequal distribution of uninsured persons).37 Although private hospitals provide most free care in the United States,38,39 the burden of charity care relative to all care provided within a given hospital is typically small. Policy makers have been more concerned about the financial stability of “core” SNPs, who have few privately insured patients from whom they can garner revenues to offset losses associated with charity care. Several trends have been identified that affect the viability of SNPs, including increasing concentration of the uninsured, decreasing Medicaid revenues, reduced disproportionate-care payments, and increased financial vulnerability.38

Studies have shown an increasing concentration of uninsured patients among safety net hospitals (SNHs), while at the same time, these hospitals are losing Medicaid patients (and revenues) to non-SNHs in their areas.40 Similarly, the growth in the number of uninsured served by community health centers (CHCs) has significantly outpaced the growth in the number of uninsured nationally since 1990 (Fig. 6),41 even while federal Section 330 grant amounts per uninsured patient remained flat.42

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Figure 6. Growth in uninsured population served by health centers, 1990–2002.

Source: Center for Health Services Research and Policy analysis of 1996–2001 UDS; 1990–1996 figures provided by NACHC; National estimates from Census.

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SNPs are extremely dependent on Medicaid revenues to maintain their financial stability. Although gross Medicaid revenues might increase because of increasing enrollment, sharp reductions in provider payments relative to the costs of care often result in losses. For example, even though Medicaid revenues for public hospitals have steadily increased since 1999, with a 33% increase from 1999 to 2002,43 56% of the public hospitals lost money on Medicaid patients in 2003.44 As a result, public hospitals experienced only a 0.05% operating margin in 2003, which was significantly lower than the average operating margin of 4.8% for all hospitals in the United States.44

Another important source of federal support for SNHs is Medicaid Disproportionate Share Hospitals (DSH) payments, which provide substantial federal matches for payments to hospitals on the basis of Medicaid volume. Earlier cuts in DSH have been eased in recent years.l However, DSH funding remains inadequate to support SNHs' losses associated with care for uninsured and Medicaid patients. Part of the problem is the ineffectiveness of the DSH program as a mechanism to target resources to care for the uninsured individuals. Increased competition has caused many nontraditional SNPs to seek Medicaid patients as a source of revenue, which then allows them to seek DSH funding. As Medicaid patients are channeled into managed care, SNHs are losing Medicaid patients and DSH payment revenues. The current formula allows providers to qualify for DSH payments on the basis of their Medicaid volume alone and does not require an explicit level of commitment to the uninsured. Second, with few exceptions, nonhospital providers are ineligible to receive DSH payments. This situation leaves community-based ambulatory care clinics, which often have the most meager financial reserves, with no comparable source of support. Third, federal funds generated through DSH mechanisms become unaccountable once they reach the states and are often used for a range of nonmedical services. Perhaps most problematic from an equity standpoint, states' DSH allotments are not at all tied to local demand for safety net care but rather are based on national formulas that reflect states' use of the DSH program before program limits were implemented in the early 1990s. In effect, those states that were most “creative” in maximizing DSH payments for their states in the early 1990s have subsequently continued to receive the bulk of DSH payments.

There have been several federal initiatives to support the safety net in recent years, with a heavy emphasis on CHCs. In 2002, the Bush Administration initiated major expansions of CHCs through the President's Health Centers Initiative, with the goal of increasing the number of patients served by CHCs annually from 10 million in 2001 to more than 16 million in 2006. In 2002, 460 grants were awarded nationally, reflecting $175 million in new spending and expanding CHCs' reach to 1.6 million new patients.45 As of 2004, the Health Resources and Services Administration (HRSA) created 334 new access points (165 new grantees, 169 new satellite sites) and awarded 285 expanded medical capacity grants—a total of 619 new or expanded sites of the 1200 planned.42 However, three-quarters of the increased funds have been targeted to funding and developing new health centers and expanding the capacity to serve more patients, leaving only 25% of the budget to support existing centers.42,m

A second major government initiative is the Community Access Program. Launched by HRSA in 2000, this well-funded federal initiative aims to enhance collaboration among SNPs and improve coordination of existing inpatient and outpatient services.45 Congress provided $25 million for the Community Access Program in 2000, increasing appropriations to more than $100 million in each of next 3 years.46 The contributions of these programs, although substantial, are unlikely to help in addressing unmet healthcare needs among the nation's uninsured.

Looking Forward: Identifying Policy Levers to Reduce Disparities

  1. Top of page
  2. Abstract
  3. Introduction
  4. Trends in Private Health Insurance
  5. Trends in Public Health Insurance: Medicaid and State Children's Health Insurance Program
  6. Trends in the Healthcare Safety Net
  7. Looking Forward: Identifying Policy Levers to Reduce Disparities
  8. Acknowledgment
  9. Conflicts of Interest
  10. References

Expanding Access to Affordable Health Insurance

Fundamentally, access to health care requires either (1) access to affordable health insurance with an appropriately robust range of services and cost-sharing arrangements minimal enough to prevent a barrier to care or (2) access to free services from providers funded to provide such care. Building the political will and mobilizing effective advocacy to expand insurance coverage is arguably the most critical policy lever in reducing health disparities.

Current approaches to expand coverage within the Bush Administration are focused on a combination of tax credits, increased flexibility for states to revamp their Medicaid and SCHIP programs, and expanded access to health care through a substantial investment in CHCs. Although the president's FY 2006 budget included $11.3 billion for a new “Cover the Kids” outreach campaign,47 this initiative is coupled with a philosophy of providing only basic coverage to more people.

Ensuring Access to the Full Range of Necessary Services

Looking ahead, those committed to reducing and ultimately eliminating health disparities must be able to cogently articulate and justify the minimum range of services needed to maintain health, and they must pursue policies at the state and federal levels to ensure that these services are protected as states pursue a redesign of Medicaid and SCHIP. Trends toward increasing cost sharing or coinsurance, even within the Medicaid/SCHIP programs, promise increased barriers to access and poorer health outcomes for low-income and underserved persons. More research is needed to understand the full effect of cost sharing on low-income families, in both public and private programs.

Ensuring the Financial Viability and Service Capacity of Safety Net Providers

Efforts to increase access to affordable insurance coverage and ensure an adequate range of benefits must be accompanied by an equal emphasis on services for the uninsured and underinsured. It remains critical to secure and monitor the financial viability and service capacity of SNPs. The recent Institute of Medicine report on the safety net recommended increased, targeted supports to SNPs, as well as an improved ability to monitor the financial health of SNPs. In response, the Agency for Healthcare Research and Quality and HRSA produced a toolkit for state policy makers that identified data elements needed to effectively monitor the capacity and performance of local safety nets and specified 118 different measures useful for monitoring.48

Developing the Ability to Systematically Monitor the Disparity Gap

Carefully monitoring the disparity gap in access to care, quality of care received, and health outcomes among minority, publicly insured, uninsured, and low-income children and adults will be essential to providing the critical leverage needed to improve the responsiveness of healthcare providers and policymakers. Although racial/ethnic disparities have been widely documented within Medicaid programs and within some private health plans, lack of available data has limited systematic tracking of disparities in care among the uninsured and among those served in private health plans.

Success in reducing disparities will require both providing health insurance coverage to all Americans and sufficient comprehensiveness of benefits within both private and public health insurance to meet enrollees' healthcare needs. The needs of lower-income and minority patients must be thoughtfully addressed and strategically advocated for within all systems of care in which these subpopulations receive health services. Until all persons are covered, this overall strategy must include consideration of the ability of SNPs to meet the needs of uninsured and underinsured persons. Our ability to measure disparities and monitor progress in reducing them across all systems of care is likewise a critical element to any systematic approach to reducing health disparities. As national policy continues to head toward devolution of decision making to state governments, with minimal guidance on scope of benefits, eligibility requirements, and cost-sharing burdens within Medicaid/SCHIP, having the ability to document the effect of such health system changes on vulnerable populations will become even more critical.

Footnotes
  • a

    A study in California found that children in working poor families are far more likely to be uninsured (20.4%) than children in nonworking poor/Temporary Assistance for Needy Families (7.9%) and nonpoor families (3.8%).8

  • b

    Beginning in 2002, several plans began offering tiered hospital plans, in which patient copays for inpatient care were waived if the patient used a “preferred” lower cost facility or “network” provider. In more recent years, network tiers including physician groups, prescription drugs, and other classes of services were introduced.7

  • c

    Unlike copays, which typically vary by class of service but are not tied to costs, coinsurance automatically indexes employee out-of-pocket cost to the price of a specific service.

  • d

    Consumer-directed health plans have become the dominant trend in benefit design (Tollen et al.11a), characterized by (1) greater point-of-service sharing, usually in the form of a much higher deductible than in typical PPO or HMO; (2) reimbursement arrangements that give enrollees at least some shelter from high cost sharing (and that may or may not allow unspent dollars to be used for other purposes or carried forward to subsequent years); (3) improved decision-making tools to help enrollees spend their money more wisely; and (4) a shift from copays to coinsurance, with the goal of sensitizing consumers to financial consequences of their choices.7

  • e

    For example, a study by Harvard Medical School, Brigham and Women's Hospital, and Medco Health Solutions found that 16%–32% of patients enrolled in large companies' prescription plans stop using needed medication within 6 months after a switch from one copay for prescription drugs to a three-tier copay.7

  • f

    A study of “bare bones” plans found that about 2%–3% of the patient population would typically have more than $4500 in out-of-pocket expenditures, whereas a smaller subset of patients, such as those needing significant mental health services or certain classes of prescription drugs, out-of-pocket costs could exceed $75,000 in a year.14

  • g

    In addition to traditional approaches of prescription drug cost containment, such as reducing payments to pharmacists and introducing copays, Medicaid programs have increasingly sought rebates from drug manufacturers (e.g., Michigan) and implemented “best in class” drug policies whereby manufacturers who wanted their drug included on Medicaid formularies had to price products at the level of lowest-cost, best-in-class drug.

  • h

    The policy objective of the waivers was to provide a mechanism for states to demonstrate alternative coverage approaches by using federal Medicaid funds without having to conform to federal standards. Waivers also allow states to reduce benefits or increase premiums or cost sharing beyond federal standards; to cover adults without dependent children who are not elderly, disabled, or pregnant through Medicaid; and to cover groups other than uninsured children by using SCHIP funds.26

  • i

    In addition to comprehensive waivers, there is a second class of more narrowly drawn waivers that focus on specific services or populations, such as family planning services or persons with human immunodeficiency virus. Finally, Section 1915 waivers allow flexibility with respect to targeted populations, such as waivers to provide home- and community-based services to people that would otherwise need nursing home care.26

  • j

    All 50 states, including the District of Columbia, maintain SCHIP with upper income eligibility thresholds averaging more than 200% of the FPL; every state's application process remains simplified; and nearly every state provides comprehensive coverage beyond federal minimum requirements. Yet recent fiscal pressures threaten to reverse gains realized through SCHIP in recent years.36

  • k

    A previous SCHIP bill vetoed by President Bush on December 12, 2007, would have increased federal funding by $35 billion over 5 years and added an estimated 4 million people to the program. In a statement notifying Congress of his decision, Bush said that the bill was unacceptable because it would allow some adults into the program, would cover people in families with incomes above the U.S. median, and would raise taxes on cigarettes. The bill passed the Democratic-controlled Senate by a vetoproof margin, but not in the House, and a two-thirds vote in both chambers is required to override a presidential veto.

  • l

    In the early 1990s, controversial financing schemes used by states to maximize federal DSH payments created much animosity, particularly the use of intergovernmental transfers whereby states shifted significant funds from local governments to state agencies to capitalize on federal matching funds, leading to increased DSH restrictions (Holahan et al.44a). DSH payments decreased 2.9% between 2000 and 2003 (Holahan and Ghosh44b) because of legislation (Benefits Improvement and Protection Act of 2001) that kept DSH allotments in 2001 and 2002 at the 2000 Balanced Budget Act levels but then returned them to levels specified in the Balanced Budget Act for 2003 (Holahan and Ghosh44b). Federal law restricting DSH payments was eased by the Medicaid Prescription Drug, Improvement, and Modernization Act in 2003, which allowed DSH payments to increase in 2004 (Holahan and Ghosh44b).

  • m

    Because of fiscal challenges faced by CHCs, many argue that preexpansion health centers deserve more attention and resources to ensure continued viability. Congress directed HRSA to set aside $25 million in FY 2004 for base adjustments to existing grantees, but there is debate over whether these funds are sufficient to cover the rising number of uninsured patients and the increasing costs of providing care.42

References

  1. Top of page
  2. Abstract
  3. Introduction
  4. Trends in Private Health Insurance
  5. Trends in Public Health Insurance: Medicaid and State Children's Health Insurance Program
  6. Trends in the Healthcare Safety Net
  7. Looking Forward: Identifying Policy Levers to Reduce Disparities
  8. Acknowledgment
  9. Conflicts of Interest
  10. References
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