August 2003 Bulletin

Uninsured health care is a growing problem

Putting economic pressures on physicians

By Frederick N. Meyer, MD

Uninsured health care is becoming an increasingly significant problem in the United States. Current estimates report there are between 40 million and 44 million uninsured Americans. Nearly one out of three Americans was uninsured for all or part of 2001—2002.

Contrary to popular opinion, this is not just a problem of the unemployed. In fact, eight out of 10 uninsured individuals under age 65 are in working families.

In most cases, the main earners in these families either had jobs that offered no health coverage or their premiums were unaffordable. Two-thirds of individuals making less than $35,000 in annual income are uninsured.

Minorities are particularly hard hit, with 58 percent of African-Americans and 67 percent of Hispanics indicating they have gone without coverage.

Insured people face the risk of losing their insurance with changing family circumstances. These include: losing a job, changing a job or becoming widowed or divorced. If a worker with employment-based insurance reaches 65 and qualifies for Medicare, a younger spouse may be left without coverage. Likewise, when a child turns 19 years old, he or she may lose coverage as a dependent.

Uninsured numbers growing

There are several reasons why the number of uninsured in this country are growing. The economy has slowed and more people are unemployed and without health insurance coverage. Health care costs are rising at double-digit annual rates, making health coverage increasingly unaffordable for employers as well as individual consumers. Also, states are experiencing fiscal shortfalls and are cutting back on public health coverage programs, such as Medicaid. This causes some low-income families to lose health coverage.

Uninsured Americans live sicker and die younger than Americans with health coverage. Self-pay patients are more likely to receive too little medical care or receive it too late. Because of the high cost of health care, they are often reluctant to use health services, often waiting until there is a crisis.

Contrary to popular belief, uninsured patients often make valiant efforts to pay their medical bills, even though a major health care crisis can have devastating effects on the financial stability of a family. Uninsured families pay up to 40 percent of their medical bills without help. As a result, medical bills are a major factor in nearly one-half of all bankruptcies.

POINT OF VIEW

Frederick N. Meyer, MD

Public subsidized care problematic

Public subsidy of care is also a major problem. Currently Medicaid expenses comprise 20 percent of state spending and are their fastest growing expense. The increasing cost to state and local governments may have several adverse effects. These include a reduction of public discretionary spending for public health functions that serve the overall community. In addition, there are higher levels of vaccine-preventable and communicable diseases, because of decreased prevention, detection and treatment for the uninsured. Finally, there is a weakening of a community's emergency preparedness and capacity to respond to bio-terrorism or mass casualty events.

During economic downturns, demand is increased by greater numbers of uninsured patients, but budget cuts decrease state and local spending on health care. This can further reduce the funding because much of the money that flows into a community comes from federal Medicaid matching funds. Because providers of health care for uninsured patients have high levels of unreimbursed costs and because the numbers of uninsured continue to rise, hospitals not receiving increased financial support may be forced to decrease outpatient services or stop offering costly inpatient services. Local health services and medical practices may be forced to close because they are being inadequately reimbursed.

Public hospitals and teaching hospitals have traditionally shouldered a disproportionate share of the care of the uninsured. The National Association of Public Hospitals reports that nearly three-quarters of its members are teaching hospitals.

Each year, millions of low-income, elderly and uninsured people rely on these "safety-net" hospitals for access to high quality care. As the number of uninsured increases, there are growing demands for services provided by these hospitals at a time when many of these facilities face operating losses that are largely the result of changes in Medicaid policy, erosion of government subsidies, and an increasingly competitive health care market. Currently, these hospitals face tremendous challenges. These include:

All of these things have come together to create what has been referred to as a "perfect storm" that could threaten the survival of many teaching and safety-net hospitals. Each year, a relatively small number of safety-net hospitals and clinics provide care for millions of low-income, elderly and uninsured patients. Since 1997, there has been increasing pressure placed on these safety-net systems. Despite decreasing reimbursement, the number of uninsured continues to rise. Providers who care for large numbers of uninsured patients often have less revenue because these patients either use fewer services or do not pay for these services in full.

Public subsidy of health care to the uninsured requires increased revenue through higher local taxes, new federal dollars or budget cuts from other services. Ironically, during economic downturns, when there are often increased numbers of uninsured patients, budget cuts that decrease state and local spending for health care may reduce the flow of federal dollars (such as Medicaid matching funds).

Proposed solutions

There have been many proposed solutions. Some may actually be detrimental to the health of safety-net hospitals. Medicaid managed care, for example has been tried in a number of states. This has tended to increase competition with private hospitals, particularly in areas with decreased reimbursement rates from private third party carriers.

On the surface, this may appear to be a good thing, but it further erodes the safety net for the uninsured. Medicaid is the largest single source of revenue for most safety-net providers. Under Medicaid managed care, Medicaid patients–particularly those who are healthier and less costly to manage–may be attracted away from safety-net hospitals to private hospitals. This leaves sicker patients or patients with poorer coverage to be cared for by safety-net hospitals, thus further impairing their economic status. Even if safety-net providers can compete effectively for managed care patients, they may be hurt by managed care's impact on their payment rates.

Safety-net providers have attempted to find solutions by joining or developing managed care plans, increasing efficiency, reducing costs and improving the quality of care they deliver. In addition, they have developed new ways to care for the uninsured and have increased lobbying efforts for financial support at the federal, state and local levels.

In a recent Institute of Medicine report, the spread of private managed care and rising numbers of uninsured patients and cutbacks in government subsidies are putting unprecedented pressure on the nation's health care safety net. The report recommends a new government initiative in the form of competitive grants to bolster safety-net providers. It also recommends the formation of a new government oversight body to monitor and assess the condition of safety-net providers. This governmental body would thoroughly review the impact of federal, state and local policies on the system.

Gov. Bill Richardson of New Mexico pleaded with Congress for more state control over Medicaid. A Bush administration proposal would give states "vast new power" to administer Medicaid. The new policy would give states "carte blanche" to alter federal coverage rules that apply to one-third of all Medicaid recipients and two-thirds of all Medicaid spending.

Sen. John Breaux (D-La.) proposed a system requiring the government and individuals to share equal responsibility for universal coverage. Insurance pools would provide coverage at group rates for those who do not receive employer-based coverage. Low- and middle-income people would receive tax credits to help fund premiums with full federal subsidies to assist those with incomes less than 150 percent of the poverty level. According to Sen. Breaux's plan, Medicare and Medicaid would be preserved for the poor needing long-term care.

The National Association of Public Hospitals supports proposals to maintain indirect medical education payments at their current level, to increase the annual inpatient and outpatient payment update amounts to help providers keep pace with the rapidly growing costs of care; and to create an all-payer trust fund for graduate medical education that would broaden the base of federal support for medical education. They also have recommended the elimination of cuts in the Balanced Budget Amendment of 1997. They strongly support legislation to raise disproportionate share hospital (DSH) payments to states that currently receive extremely low allotments.

Rising numbers of uninsured patients, together with changes in Medicaid policies and cutbacks in government subsidies, are putting unprecedented pressure on health care providers who serve our nations' most needy patients. A number of solutions have been proposed. However, no matter what is proposed, it is imperative that these solutions consider the impact on core safety-net providers. These solutions should strengthen the institutions that have been the backbone of care for our nations' medically underserved population and they should be reviewed regularly for their effectiveness in meeting their objectives.

Frederick N. Meyer, MD, is Professor and Chairman, Department of Orthopaedic Surgery, University of South Alabama. He can be reached at (251) 471-7937 or via e-mail at freddoc937@msn.com


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