Essays academic service


Impact of uninsured and underinsured population on healthcare organization

Department of Veterans Affairs VAand local health departments. For local health departments, for which client health insurance status is not available, the authors assumed that the same proportion of local public health clinic expenditures were attributable to uninsured users as for Bureau of Primary Health Care programs, 32 percent.

As shown in Table 3.

Physicians By waiving or reducing their fees to uninsured patients and volunteering their time in free clinics and similar settings, physicians provide a significant amount of charity care. One American Medical Association AMA survey reports that physicians provided about equal amounts of reduced-price and free care Emmons, 1995. Unlike the case with hospitals and publicly supported clinics, physicians and others in individual and small-group practices usually do not receive explicit subsidies for uncompensated care nor do they have the organizational superstructure and capacity of larger providers to absorb and balance the financial burdens of uncompensated care.

These two sources provide similar estimates of the proportion of practicing physicians who provide any charity care and quite different estimates of the average amount of charity care provided by those physicians who provide any. Hadley and Holahan based their estimate of the value of uncompensated care physicians provide to uninsured persons on the midpoint of the range of average weekly hours of charity care reported for the 1994 AMA survey 7.

They assumed that all of the free care and one-third of the reduced-price care were provided to uninsured patients. The study's authors derived their estimates from two sets of data sources independently and thoroughly documented and justified the assumptions they made in developing the estimates. Overall, public support from the federal, state, and local governments accounts for between 75 and 85 percent of the total value of uncompensated care estimated to be provided to uninsured people each year.

Sixty percent of governmental support for uncompensated care in hospitals is federal, through Medicare and Medicaid disproportionate share hospital DSH payments to general hospitals, a portion of Medicare payments for indirect medical education that supports services impact of uninsured and underinsured population on healthcare organization medically indigent patients, and other supplemental Medicaid financing impact of uninsured and underinsured population on healthcare organization as upper-payment limit UPL mechanisms.

As just discussed, federal, state, and local subsidies of various kinds appear to equal the estimate of hospital uncompensated care costs.

Philanthropic support for hospitals in general accounts for between 1 and 3 percent of hospital revenues Davison, 2001 and, because much of this support is dedicated to other purposes e. These surplus payments, however, tend to be inversely related to the amount of free care that hospitals provide. A study of urban safety-net hospitals in the mid-1990s found that safety-net hospitals' case loads on average included 10 percent self-pay or charity cases and 20 percent privately insured, whereas among nonsafety-net hospitals, just 4 percent were self-pay or charity cases and 39 percent were privately insured Gaskin and Hadley, 1999a,b.

Thus, those hospitals with private payer surplus revenues and revenues from sources other than patient care, such as parking fees are not the hospitals that bear most of the load of uncompensated care.

Based on this reasoning, Hadley and Holahan assume that between 10 and 20 percent of these surplus revenues subsidize care to the uninsured. The issue of cross-subsidies of uncompensated care from private payers and the impact of uninsurance on the prices of health care services and insurance are discussed in the following section.

There is mixed evidence that uncompensated care is subsidized by private payers.

The impact of any such shifting of costs to privately insured patients and insurers is unlikely to be so large as to affect the prices of health care services and insurance premiums. Have the 41 million uninsured Americans contributed materially to the rate of increase in medical care prices and insurance premiums through cost shifting?

Health care prices and health insurance premiums have increased more rapidly than other prices in the economy for many years. In 2002, medical care prices rose by 4. Since the last bench-marking of the series between 1982 and 1984, overall prices have risen by about 80 percent, while medical care prices have risen by 185 percent BLS, 2002. Health insurance premiums rose by 12. These high rates of increases in medical care prices and health insurance premiums have been attributed to a number of factors, including medical technology advances e.

  • As just discussed, federal, state, and local subsidies of various kinds appear to equal the estimate of hospital uncompensated care costs;
  • The tax burden of funding care for uninsured residents is more concentrated locally than is the burden of Medicaid finance or other insurance-based public programs in which the federal government participates IOM, 2003a;
  • During the middle to late 1990s, the fiscal capacity and resources of all levels of government for spending on health programs grew;
  • Access to primary care may be partly alleviated by the establishment of patient-centred medical homes and accountable care organizations and by the greater use of electronic medical records, all of which are designed to create efficiencies and reduce the duplication of services;
  • Such coverage is less likely to be available in areas with a lower-waged labor force IOM, 2001a.

If people without health insurance paid the full bill when they were hospitalized or used physician services, there would seem to be no reason to believe that they contributed any more to the large increases in medical care prices and insurance premiums than insured persons.

Although uninsured patients are not the only people who account for uncompensated care, the estimates presented assume that they are responsible for much of it. It is certainly an overestimate to attribute all hospital bad debt and charity care to uninsured patients, as Hadley and Holahan acknowledge, because patients who have some insurance but cannot or do not pay deductible and coinsurance amounts account for some of this uncompensated care.

Of those physicians reporting that they provided charity care, about half of the total was reported as reduced fees, rather than as free care Emmons, 1995. To reach their final estimate, Hadley and Holahan assumed that all of the free care by physicians and one-third of the reduced price care were provided to uninsured patients.

Little information is available for investigating the extent to which private employers and their employees subsidize the care given to uninsured persons through the insurance premiums they pay or the size of this subsidy.

Because uninsured patients are disproportionately served by safety-net facilities, which serve relatively low proportions of privately insured patients Gaskin and Hadley, 1999a,b; Lewin and Altman, 2000; IOM, 2003athe opportunity for cross-subsidy is limited. Using the example of South Carolina, about seven-eighths of the private subsidies for uninsured care from nongovernmental sources came from philanthropies and other hospital nonoperating revenue, while the remaining one-eighth came from surpluses generated from private-pay patients Conover, 1998.

It is difficult to interpret the changes in hospital pricing because published studies have examined individual hospitals rather than the overall relationships among uncompensated care, high uninsured rates, and pricing trends in the hospital services market overall. If for-profit hospitals are presumed to be profit maximizers as standard economic theory predictsthey would have little or no opportunity to raise prices to private payers to compensate for providing services to the uninsured Needleman, 1994; Zwanziger et al, 2000.

  • Based on this reasoning, Hadley and Holahan assume that between 10 and 20 percent of these surplus revenues subsidize care to the uninsured;
  • The study's authors derived their estimates from two sets of data sources independently and thoroughly documented and justified the assumptions they made in developing the estimates;
  • By January 2014, 17 states had opted to develop and manage their own exchanges, 27 states had decided to rely entirely on a federal exchange and the remaining states were developing an exchange jointly with the federal government;
  • An exchange typically provides several insurance plans that offer a minimum list of essential benefits, flat rate — community-rated — premiums that are not based on health status, and tax subsidies for individuals on relatively low incomes;
  • An exchange typically provides several insurance plans that offer a minimum list of essential benefits, flat rate — community-rated — premiums that are not based on health status, and tax subsidies for individuals on relatively low incomes.

Finally, the total burden of utilization and expenses by uninsured people has remained quite stable over the past decade or so Taylor et al.

For uncompensated care utilization by the uninsured to affect the rate of increase in service prices and premiums, the proportion of care that was uncompensated would have to be increasing as well. There is somewhat more evidence for cost shifting among nonprofit hospitals than among for-profit hospitals because of their service mission and their location Hadley and Feder, 1985; Dranove, 1988; Frank and Salkever, 1991; Morrisey, 1993; Gruber, 1994; Morrisey, 1994; Needleman, 1994; Hadley et al.

Private hospitals have become less able to shift costs as health services markets have become more competitive Morrisey, 1993; Bamezai et al. Some studies have demonstrated that the provision of uncompensated care has declined in response to increased market pressures Gruber, 1994; Mann et al.

The concern with cost shifting from the uninsured to the insured population as a phenomenon may be changing to a focus on the transference of the burden of uncompensated care from private hospitals to public institutions due to decreased profitability of hospitals overall Morrisey, 1996. Instead of shifting costs, private hospitals are cutting costs and reducing uncompensated care Campbell and Ahern, 1993; Gruber, 1994; Zwanziger et al.

  1. The quality of the insurance coverage has to be considered alongside the extent of such coverage.
  2. While the ACA will probably be able to withstand any political challenges while President Obama remains in office, this may not be the case in the future.
  3. It is also consistent with analyses that are adjusted for demographic differences, as illustrated by the statistics in Table 5.

Private subsidies and cost shifting may also take place among community-based providers, particularly in rural areas. Coburn 2002 argues that physicians in private practice are able to provide the 20 to 40 percent of uncompensated care in rural communities that they do because they are supported or subsidized by their community's hospital.

For employers in rural areas, the seriousness of the question of cross-subsidy is a function of scale. It is a greater burden in small towns, where there are fewer employers across whom to spread the cross-subsidy when it occurs in the form of higher costs for health care and for health insurance premiums.

As a result, there is a competitive disadvantage that accrues to employers who offer more generous or greater subsidies of their employment-based coverage. The extent to which cost shifting exists and thus the extent to which it influences medical care price increases are probably quite small.

Physician charity care to uninsured patients accounted for 1. The Committee concludes that there is little reason to believe that uncompensated hospital and physician care appreciably inflates the prices that providers charge their private patients. The costs of direct provision of health care services to uninsured individuals fall disproportionately on the local communities where they reside. Most of the costs of care for uninsured Americans are passed down to taxpayers and consumers of health care in the forms of higher taxes and fewer resources available for other public purposes.

A high uninsured rate locally may both reflect and contribute to an area's economic challenges because the rate reflects the lack of employment-based coverage. Such coverage is less likely to be available in areas with a lower-waged labor force IOM, 2001a.

The tax burden of funding care for uninsured residents is more concentrated locally than is the burden of Medicaid finance or other insurance-based public programs in which the federal government participates IOM, 2003a.

UNINSURED PEOPLE USE LESS MEDICAL CARE THAN DO THOSE WITH COVERAGE

As the Committee noted in A Shared Destiny, given the differences in scope of public finance arrangements and the range of strategies employed to finance uncompensated care and safety-net arrangements from community to community, there is no generalized, simple relationship between a community's uninsured rate and its tax burden. One would expect an increasing uninsured rate to create pressures to increase taxes and reallocate public funds devoted to other activities, if the legal structures of taxation and spending allow.

Thus, a relatively greater or rapidly increasing uninsured rate may result in higher local and state tax burdens than in areas with proportionately fewer uninsured residents.

  1. They assumed that all of the free care and one-third of the reduced-price care were provided to uninsured patients.
  2. To ensure that clinical rather than financial interests are prioritized, the institute is limited in its use of comparative effectiveness data and cannot use dollars per quality-adjusted life-year in its analyses.
  3. Early experiences with the ACOs have been mixed. The costs of direct provision of health care services to uninsured individuals fall disproportionately on the local communities where they reside.
  4. The impact of any such shifting of costs to privately insured patients and insurers is unlikely to be so large as to affect the prices of health care services and insurance premiums.

On the other hand, states and localities are constrained in their ability to raise additional revenues through taxes to subsidize care for uninsured persons Desonia, 2002. States with low per capita income or depressed economies, characteristics that are positively associated with uninsurance, experience even more fiscal stress financing care than do more prosperous states Holahan, 2002; IOM, 2003a. During the middle to late 1990s, the fiscal capacity and resources of all levels of government for spending on health programs grew.

Starting in 1999, states increasingly have been experiencing hard times, with economic recession, federal cuts to Medicare and Medicaid, and public resistance to raising taxes Dixon and Cox, 2002; Lutzky et al.

The consequences of these responses are likely to result simultaneously in lower public funding for health insurance, fewer public funds available for other purposes, and higher taxes. The entitlement nature of most state government support for health financing means that these programs tend to absorb discretionary revenues Hovey, 1991. Once funding levels for health entitlement programs have impact of uninsured and underinsured population on healthcare organization decided, substantial pressure is placed on the remaining items in state and local budgets, including direct financing of public hospital and clinic services.

States' ability to levy taxes and their tax structures constrain revenue increases to support care for uninsured persons. California is home to the greatest number of uninsured people of any state in the nation. Los Angeles County, with nearly a third of its 8. Medicaid represents 20 percent, on average, of states' budgets, and the financial incentives of the federal match as well as federal program requirements draw state funds away from more discretionary spending on the uninsured and into the Medicaid program Miller, 2002b.

Fifty-seven percent of national Medicaid expenditures are paid for by the federal government and 70 percent of SCHIP spending nationally has been paid for by the federal allocation. SUMMARY The Committee has sketched the range of costs involved in providing health care services for uninsured people, both those borne out of pocket by the uninsured themselves and uncompensated care costs borne by a variety of public programs, providers of services, philanthropy, and possibly by other payers as well.

The full costs of being uninsured for uninsured individuals themselves, however, are not limited to their own payments for the services that they do receive. Uninsured persons, and children in families with uninsured members, on average use less health care than do insured persons and members of fully insured families.

Challenges facing the United States of America in implementing universal coverage

When uninsured persons do use health services, they and their families bear a disproportionately higher proportion of the cost of care in relationship to their often lower incomes, in comparison to insured families and their higher incomes, on average.

For uninsured persons and families, utilization is more likely to lead to higher out-of-pocket expenditures and greater financial stress IOM, 2002b.

Health care services used by uninsured people often are uncompensated in part or whole, resulting in costs to providers, communities, and society, as well as being a source of financial stress, anxiety, and possibly shame for recipients. The burden of uncompensated care is distributed widely and unevenly across providers and sponsors, depending on local configurations of health care services and institutions and on the structure of state and local revenue sources IOM, 2003a.

You are here:

Uncompensated care costs may beget additional external costs in the forms of higher local taxes to subsidize or reimburse uncompensated care, diversion of public funds from other public programs, and reduced availability of certain kinds of services within communities. These costs are discussed in the following chapter.

The Value Lost in Healthy Life Years Estimating Health Capital Footnotes 1 The differences in service utilization costs between uninsured and insured individuals reported in this chapter have not been adjusted for differences between the two groups in age composition and family income, which also affect health services use and spending.

In contrast, the projections reviewed in Chapter 5 of service use and expenditures for those without insurance if their utilization was the same as for those with coverage do adjust for demographic and socioeconomic factors.

It is also consistent with analyses that are adjusted for demographic differences, as illustrated by the statistics in Table 5. Those without health insurance are disproportionately young adults, whose per capita health spending is lower on average than that of older adults.

  • These costs are initially based on the mean Medicare inpatient and outpatient expenditures — in the three years before the formation of the ACO — for each beneficiary assigned to the ACO;
  • Have the 41 million uninsured Americans contributed materially to the rate of increase in medical care prices and insurance premiums through cost shifting?
  • However, in the current divisive political climate, any new initiatives to achieve universal health coverage will be difficult to legislate or implement;
  • It is not clear, however, how a policy like the ACA could keep premiums in check if residents were not required to purchase coverage.

Household responses about payments for care are corroborated by querying providers. The CTS surveys in 1999 and 2001 found that 72 percent of responding physicians reported providing any charity care and in 1999 they reported providing an average of 10. Copyright 2003 by the National Academy of Sciences.