Cross Community Perspectives on Safety Net Models

1. Robert E. Hurley, Ph.D.Virginia Commonwealth University andthe Center for Studying Health System Change Cross Community Perspectives on Safety Net Models

2. Overview • Indigent care eco-systems • Approaches to ensuring access to care • Community Tracking Study • Illustrative market experience • Extracting some lessons • Conclusion

3. Communities have distinct indigent care “eco-systems” • Multiple approaches to ensure acute medical care availability to low income persons without insurance coverage • Community mores, public policy, provider capacity, extent and nature of demand influence access to indigent care • Communities implicitly or explicitly customize approaches to meet unique needs based on particular circumstances • A balance is achieved, somehow: an eco-system emerges

4. Methods to Ensure Access to Care • Make it • Buy it • Subsidized it -Direct subsidy -Cross-subsidy

5. Make it • Directly provide services via government owned facilities and/or employed providers • Classic “safety net” providers, e.g. publicly-owned hospitals, FQHCs, local health dept. clinics • Open door policy (serve all comers) • Traditional emphasis on acute care and episodic delivery • Challenge is how to get best value for investment

6. Buy it • Public sector purchases care from private providers on behalf of persons who cannot afford it themselves -”vendor payment” programs - payments typically below market rates • Provide/purchase coverage for persons who cannot purchase it for themselves -Medicaid expansions, SCHIP, etc -Opportunities to “privatize” coverage

7. Subsidize—Direct Subsidy • Provide support to selected providers to defray cost of uncompensated care - designated for groups/classes of individuals - may include (arguably) tax exempt status • Public and private (e.g. conversion foundations) resources committed to targeted programs and populations • e.g. Disproportionate share payments to hospitals (DSH), free clinics • Limited ability to meet large scale needs

8. Subsidize-- Cross-subsidy • Require providers to donate care and finance donation by generating surpluses from other payers e.g. EMTALA and other non-discrimination policies • Convenient kind of default public policy decision (“hidden tax” most easily supported; hospital as tax collector) • In addition to providing funds for uninsured, seen as source to make-up for public payer shortfalls • Promotes/perpetuates “cost-shifting”

9. “Cost-shifting” to Private Payers Hospital Payments as % Costs-1990 Source: ProPAC, 1992.

10. “Cost-shifting” to Private Payers Hospital Payments as % Costs-2001 Source: MedPAC, 2003

11. The Rise and Fall and Rise of Cost-Shifting—1990-2005Hospital payments as percentage of costs by payer Source: MedPAC, 2005

12. Cost-Shifting and its Implications • Cost shifting to private purchasers played key role in promoting managed care revolution • Managed care = systematic suppression of cost shifting • Cost shifting is growing again • Many current state reform initiatives (ME, MA, CA) highlighting cost shifting consequences • Can a hidden tax be replaced by not-so-hidden financing sources???

13. Community Tracking Study Sites* Seattle, WA, WA Syracuse, NY Boston, MA Lansing, MI Northern NJ Cleveland, OH Indianapolis, IN Orange County, CA Little Rock, AR Phoenix, AZ Greenville, SC Miami, FL *Community Tracking Study—Funded by the Robert Wood Johnson Foundation; carried out by the Center for Studying Health System Change

14. Mix of Coverage in CTS Markets

15. Mix of Coverage in HSC Markets

16. Eco-systems in Illustrative Markets • Boston • Indianapolis • Little Rock • Orange County

17. Boston Extensive private coverage; relatively generous Medicaid coverage; low level of uninsured (7-8%) • Make Two major public hospitals, 20+ CHCs • Buy Free care pool-DSH and hospital tax supported • Subsidize Public hospitals offer managed care products to uninsured via subsidies New universal coverage program being rolled out; combinations of strategies including make, buy, and subsidize—good sensitivity to protecting safety net in transition

18. Indianapolis Solid employer coverage, modest Medicaid, manageable uninsured burden • Make Public hospital with tax support and AHC affiliation, several CHCs • Buy Publicly supported local managed care product for uninsured paying for ambulatory care at CHCs • Subsidize Inpatient care for uninsured concentrated in public hospital Rapid growth in local low income coverage program and growing demands on public hospital and academic specialty departments creating some financial distress.

19. Little Rock Modest employer coverage, Medicaid expansive only for children, substantial uninsured population • Make UA Medical Sciences Center major regional source of inpatient and specialty care for indigent • Buy Highly inclusive ARKids (Medicaid and SCHIP) • Cross subsidize Reliance on NFP hospitals and physicians for donated care Marked disparities between access to care for kids vs. adults; serious shortage of specialty care for uninsured even at AHC

20. Orange County, CA Limited employer sponsored coverage, moderate Medicaid participation, substantial uninsured • Make UC-Irvine—public AHC, only 2 FQHCs in county with 3 million, 19 private CHCs • Buy Medically indigent vendor program for legal county residents • Subsidize Donations to private clinics and free clinics/CHCs, childrens’ hospital • Cross subsidize FP/NFP hospitals provide limited uncompensated inpatient and ED care Access to specialty care significant problem and disproportionate burden on relatively small AHC New state universal coverage proposal now in play

21. Common Themes • Strength of employer coverage is key • Scope of Medicaid is important • Public providers (makers) typically backbone • Many private providers prone to avoid uninsured where they can • Some success in local low income coverage models—but typically exploit inpatient care providers • Specialty care and prescription drugs can’t be “made” and are expensive to buy or subsidize, so increasingly difficult to acquire

22. Contemporary Concerns • Employer-sponsored insurance growth has stalled and appears to be slipping • Premiums rising; benefits being trimmed; take-up rates likely to fall • Extent of “under-insurance” increasing • Donor fatigue (contributed charity care) growing • Public programs expanding enrollment but financial burden growing • Cost-shifting being quantified and vilified, but replacement financing mechanism unclear

23. Broad Strategies—What Could be Done? • Incrementally expand public programs to cover more people • Shore up erosion in employer coverage • Expand availability of private coverage via incentives to individuals • Create new grouping mechanisms to overcome limitations of employer sponsorship • Compel private firms to provide coverage or individuals to acquire coverage • Consider a national health insurance scheme to complement or replace existing patchwork

24. What’s Likely to be Done? • Not very much on a national level, yet, though universal coverage for children may be in sight • Promising, but uneven, action at state level— “mosaic approach” is most common: fill in picture with separate pieces targeted to distinct populations • Affordability remains a crucial impediment • Local eco-systems will remain key

25. If We Do Nothing. . . • Growing strains on public providers • Default public policy to remain cost-shifting in many/most markets • Uneven burden by -communities -provider types -service lines • “Deserving kids” vs. others • Economics disparities are at the root of much of the contemporary disparity concern

26. The Widening Rift. . . • A widening rift in access is inevitable among the have, the have-little, and the have-not • No likelihood of broad gauge, near term response • Eco-systems will adapt but stress and distress will become more evident on all parties