The effect of the availability of charity care to the uninsured on the demand for private health insurance

The economic reasons why some people do not obtain health insurance are unclear. In this paper, I test the hypothesis that the availability of charity care to the uninsured reduces the likelihood of obtaining private coverage. I utilize variation in the availability of charity care across the different markets in the Community Tracking Study's Household Survey (CTS-HS) using an "access to care" measure of the uninsured's cost-related difficulties in obtaining medical care, to both aggregate across the various "safety net" providers and control for its potentially endogenous supply. I find evidence supporting this hypothesis for low-income people, in both the individual market and the employment-based group market. I also estimate a joint model of offer and take-up decisions for the group market sample and find that the availability of charity care reduces low-income workers' offer rates but not their take-up rates.     

Uncompensated emergency care in hospital markets in Los Angeles County.

A survey of hospital emergency rooms in Los Angeles County was conducted in March 1987. Analysis of the distribution of uninsured emergency care patients revealed that private hospitals play a significant frontline role in terms of entry into the hospital system for patients who are unable to pay--almost one-half of such patients were treated in the emergency rooms of private hospitals. Hospitals serving markets in which a higher proportion of residents had incomes below the poverty level provided a greater share of uncompensated emergency room services.     

Local access to care programs (LACPs): new developments in the access to care for the uninsured

Context: New, locally based health care access programs are emerging in response to the growing number of uninsured, providing an alternative to health insurance and traditional safety net providers. Although these programs have been largely overlooked in health services research and health policy, they are becoming an important local supplement to the historically overburdened safety net. Methods: This article is based on a literature review, Internet search, and key actor interviews to document programs in the United States, using a typology to classify the programs and document key characteristics. Findings: Local access to care programs (LACPs) fall outside traditional private and publicly subsidized insurance programs. They have a formal enrollment process, eligibility determination, and enrollment fees that give enrollees access to a network of providers that have agreed to offer free or reduced‐price health care services. The forty‐seven LACPs documented in this article were categorized into four general models: three‐share programs, national‐provider networks, county‐based indigent care, and local provider–based programs. Conclusions: New, locally based health access programs are being developed to meet the health care needs of the growing number of uninsured adults. These programs offer an alternative to traditional health insurance and build on the tradition of county‐based care for the indigent. It is important that these locally based, alternative paths to health care services be documented and monitored, as the number of uninsured adults is continuing to grow and these programs are becoming a larger component of the U.S. health care safety net.     

Health Care Markets, the Safety Net, and Utilization of Care among the Uninsured

Objective. To quantify the relationship between utilization of care among the uninsured and the structure of the local health care market and safety net.
Data Sources/Study Setting. Nationally representative data from the 1996 to 2000 waves of the Medical Expenditure Panel Survey (MEPS) linked to data from multiple secondary sources.
Study Design. We separately analyze outpatient care utilization and whether an individual incurred any medical expenditure among uninsured adults living in urban and rural areas. Safety net measures include distances between each individual and the nearest safety net providers as well as a measure of capacity based on local government and hospital health expenditures. Other covariates include the managed care presence in the local health care market, the percentage of individuals who are uninsured in the area, and local primary care physician supply. We simulate utilization using standardized predictions.
Principal Findings. Distances between the rural uninsured and safety net providers are significantly associated with utilization. In urban areas, we find that the percentage of individuals in the area who are uninsured, the pervasiveness and competitiveness of managed care, the primary care physician supply, and safety net capacity have a significant relationship with health care utilization.
Conclusions. Facilitating transport to safety net providers and increasing the number of such providers are likely to increase utilization of care among the rural uninsured. Our findings for urban areas suggest that the uninsured living in areas where managed care presence is substantial, and especially where managed care competition is limited, could be a target for policies to improve the ability of the uninsured to obtain care. Policies oriented toward enhancing funding for the safety net and increasing the capacity of safety net providers are likely to be important to ensuring the urban uninsured are able to obtain health care.     

Hospitals respond to Medicare payment shortfalls by both shifting costs and cutting them, based on market concentration

The coverage expansions planned under the Affordable Care Act are to be financed in part by slowing Medicare payment updates to hospitals, thereby reigniting the debate over whether low prices paid by public payers cause hospitals to increase prices to private insurers--a practice known as cost shifting. Recently, the Medicare Payment Advisory Commission (MedPAC) proposed an alternative explanation of hospital pricing and profitability that could be used to support policies that pressure hospitals to reduce overall costs rather than to only raise prices. This study evaluated the cost-shift and MedPAC perspectives using 2008 data on hospital margins for 30,514 Medicare and privately insured patients undergoing any of seven major procedures in markets where robust hospital competition exists and in markets where hospital care is concentrated in the hands of a few providers. The study presents empirical evidence that, faced with shortfalls between Medicare payments and projected costs, hospitals in concentrated markets focus on raising prices to private insurers, while hospitals in competitive markets focus on cutting costs. Policy makers need to examine whether efforts to promote clinical coordination through provider integration may interfere with efforts to restrain overall health care cost growth by restraining Medicare payment rates.     

Responding to financial pressures. The effect of managed care on hospitals’ provision of charity care

Healthcare financing and insurance is changing everywhere. We want to understand the impact that financial pressures can have for the uninsured in advanced economies. To do so we focus on analyzing the effect of the introduction in the US of managed care and the big rise in financial pressures that it implied. Traditionally, in the US safety net hospitals have financed their provision of unfunded care through a complex system of cross-subsidies. Our hypothesis is that financial pressures undermine the ability of a hospital to cross-subsidize and challenges their survival. We focus on the impact of price pressures and cost-controlling mechanisms imposed by managed care. We find that financial pressures imposed by managed care disproportionately affect the closure of safety net hospitals. Moreover, amongst those hospitals that remain open, in areas where managed care penetration increases the most, they react by closing the health services most commonly used by the uninsured.     

The effects of price competition and reduced subsidies for uncompensated care on hospital mortality

OBJECTIVE: To determine whether hospital mortality rates changed in New Jersey after implementation of a law that changed hospital payment from a regulated system based on hospital cost to price competition with reduced subsidies for uncompensated care and whether changes in mortality rates were affected by hospital market conditions. DATA SOURCES/STUDY SETTING: State discharge data for New Jersey and New York from 1990 to 1996. Study Design. We used an interrupted time series design to compare risk-adjusted in-hospital mortality rates between states over time. We compared the effect sizes in markets with different levels of health maintenance organization penetration and hospital market concentration and tested the sensitivity of our results to different approaches to defining hospital markets. DATA COLLECTION/EXTRACTION METHODS: The study sample included all patients under age 65 admitted to New Jersey or New York hospitals with stroke, hip fracture, pneumonia, pulmonary embolism, congestive heart failure, hip fracture, or acute myocardial infarction (AMI). PRINCIPAL FINDINGS: Mortality among patients in New Jersey improved less than in New York by 0.4 percentage points among the insured (p=.07) and 0.5 percentage points among the uninsured (p=.37). There was a relative increase in mortality for patients with AMI, congestive heart failure, and stroke, especially for uninsured patients with these conditions, but not for patients with the other four conditions we studied. Less competitive hospital markets were significantly associated with a relative decrease in mortality among insured patients. CONCLUSIONS: Market-based reforms may adversely affect mortality for some conditions but it appears the effects are not universal. Insured patients in less competitive markets fared better in the transition to price competition.     

Availability of safety net providers and access to care of uninsured persons

OBJECTIVE: To understand how proximity to safety net clinics and hospitals affects a variety of measures of access to care and service use by uninsured persons. DATA SOURCES: The 1998-1999 Community Tracking Study household survey, administered primarily by telephone survey to households in 60 randomly selected communities, linked to data on community health centers, other free clinics, and safety net hospitals. STUDY DESIGN: Instrumental variable estimation of multivariate regression models of several measures of access to care (having a usual source of care, unmet or delayed medical care needs, ambulatory service use, and overnight hospital stays) against endogenous measures of distances to the nearest community health center and safety net hospital, controlling for characteristics of uninsured persons and other area characteristics that are related to access to care. The models are estimated with data from a nationally representative sample of uninsured people. PRINCIPAL FINDINGS: Shorter distances to the nearest safety net providers increase access to care for uninsured persons. Failure to account for the endogeneity of distance to safety net providers on access to care generally leads to finding little or no safety net effects on access. CONCLUSIONS: Closer proximity to the safety net increases access to care for uninsured persons. However, the improvements in access to care are relatively small compared with similar measures of access to care for insured persons. Modest expansion of the safety net is unlikely to provide a full substitute for insurance coverage expansions.     

Two years into the storm over pricing to and collecting from the uninsured--a hospital valuation expert examines the risk/return dynamics and asks: would fair pricing and fair medical debt repayment plans increase yields to hospitals and simultaneously mitigate these controversies?

As the controversies over 501(c)(3) "charitable" hospitals' pricing, collections, and charity care practices that emerged in the winter and spring of 2003 continue unabated--now involving government officials from city councils and county boards to state attorneys general and Congress as well as numerous class action lawsuits--a hospital valuation expert and risk analyst looks at the fundamental economic and strategic issues, concluding that the risk/return dynamics are out of whack in that hospitals are facing mushrooming, multifaceted troubles over what has been a very low net yield patient population. After interviewing patient account representatives at hospitals and conducting other research, this analyst asks: Should attention have been focused at the national and state hospital association levels in 2003 to take steps to increase the net yield to hospitals from the uninsured population through more equitable pricing and better medical debt repayment terms, steps that might have mitigated these controversies? Many hospitals and hospital associations have been so intent on proving hospitals' legal right to charge "list price" to and sue the uninsured that they have overlooked a simple yet effective business premise that many hospital patient accounts representatives already fully know: Fair pricing and fair payment terms are actually good business. The author asserts that the controversies that emerged in 2003 actually represented a significant opportunity that, with a different approach, would likely have resulted in hospitals being able to collect significantly more money from the uninsured population while, at the same time, lessening or even avoiding the destructive ramifications that have occurred in the form of investigations, legislation, and lawsuits. To realize higher net yields from the uninsured, highly specific leadership steps need to be taken uniquely at national and state "association" levels in order to avoid the negative financial consequences of fragmented actions that can cause individual hospitals to become "magnets" for the uninsured. Steps at the individual hospital level need to be preceded by coordinated leadership at the "association" level if these difficult controversies are to be transformed into an opportunity for more revenue from the uninsured, an opportunity that existed in 2003 and before.     

Limits to the safety net: teaching hospital faculty report on their patients' access to care

Many major teaching hospitals might not be able to offer adequate access to specialty care for uninsured patients. This study found that medical school faculty were more likely to have difficulty obtaining specialty services for uninsured than for privately insured patients. These gaps in access were similar in magnitude for public and private institutions. Initial treatment of uninsured patients at academic health centers (AHCs) does not guarantee access to specialty and other referral services, which suggests that there are limits to relying on a health care safety net for uninsured patients. AHCs and affiliated group practices should examine policies that limit access for uninsured patients.     

Competition among hospitals.

The traditional view of hospital competition has posited that hospitals compete primarily along 'quality' dimensions, in the form of fancy equipment to attract admitting physicians and pleasant surroundings to entice patients. Price competition among hospitals is thought to be non-existent. This paper estimates the effects of various hospital market characteristics on hospital prices and expenses in an attempt to determine the form of hospital competition. The results suggest that both price and quality competition are greater in markets that are less concentrated, although the net effect of the two on prices is insignificant. It appears, therefore, that, despite important distortions, hospital markets are not immune to standard competitive forces.     

The changing profile of the urban uninsured: Exploring implications of rise in the number of moderate-income uninsureds

Access to care is a major problem in urban America that increasingly affects new segments of the population. Although the demographic profile of the uninsured has changed, recording large increases in numbers of moderate-income uninsured persons, it has not been accompanied by changes in health care safety net programs or increased availability of private insurance products tailored to these groups. Any such changes, however, need to be based on a good understanding of the similarities and differences between low-income and moderate-income uninsured. Based on a telephone survey of the uninsured in three northern New Jersey counties, this study presents a systematic comparison of low-income (below 150% of federal poverty level) and moderate-income (150% to 350% federal poverty level) uninsured on attitudes to health care, perceptions regarding access to care, health status, and health care utilization. We discuss the implications of this comparison for expanding health care access and design of safety net programs and institutions. Dr. Pandey is Assistant Professor of Public Policy and Administration at Rutgers University, Camden, New Jersey, and holds a secondary appointment in the School of Public Health of the University of Medicine and Dentistry of New Jersey     

Dropped out or pushed out? Insurance market exit and provider market power in Medicare Advantage

This paper explores how provider and insurer market power affect which markets an insurer chooses to operate in. A 2011 policy change required that certain private insurance plans in Medicare form provider networks de novo; in response, insurers cancelled two-thirds of the affected plans. Using detailed data on pre-policy provider and insurer market structure, I compare markets where insurers built networks to those they exited. Overall, insurers in the most concentrated hospital and physician markets were 9 and 13 percentage points more likely to exit, respectively, than those in the least concentrated markets. Conversely, insurers with more market power were less likely to exit than those with less, and an insurer's market power had the largest effect on exit in concentrated hospital markets. These findings suggest that concentrated provider markets contribute to insurer exit and that insurers with less market power have more difficulty surviving in concentrated provider markets.     

Care for the uninsured in general internists' private offices

This paper examines the care of uninsured patients in general internists' private practices. More than two-thirds of internists provide at least some charity care, usually to their existing patients who have become uninsured. They appear to be filling a need for people who are moving between coverage, by helping bridge coverage intervals. Approximately two-thirds of all internists accommodate uninsured patients by reducing the charge or creating a payment plan, with internists who are practice owners much more likely to do so. This care to the uninsured is important, especially with growing unemployment rates, because the safety net would not be able to absorb these patients.     

The costs and adequacy of safety net access for the uninsured in Genesee County, Michigan

This commentary examines Genesee County (Flint) Michigan to explore whether a well-structured safety net system is able to provide low-income uninsured people adequate access to care at a reasonable cost. Genessee County is one of the more economically challenged communities in the country. This commentary explores the cost and adequacy of safety net care in Genessee County under the Genessee Health Plan (GHP). The analysis compares the cost of services under GHP to the cost of the same services offered by local private insurers and Medicaid. An analysis found that GHP, Flint-area physicians, hospitals, and foundations have succeeded in providing basic medical care access to a substantial majority of their low-income uninsured citizens. The costs of care, both paid by GHP and donated by local providers, are substantially less than the estimated costs if this population were covered by full Medicaid or private insurance.     

Hospitals, managed care, and the charity caseload in California

We ask whether increasing HMO penetration causes hospitals to cut back on charity care using California hospital discharge data for 1988-1996. There is little evidence at the hospital level that private hospitals respond to HMOs by turning away uninsured and/or Medicaid patients. In the for-profit sector hospitals actually reduce the share of privately insured patients and increase the shares of Medicare patients and Medicaid births. Apparently, HMO penetration reduces the price paid by privately insured patients, making them relatively less attractive to for-profit hospitals.     

Does uninsurance affect the health outcomes of the insured? Evidence from heart attack patients in California

In this paper, I examine the impact of uninsured patients on the in-hospital mortality rate of insured heart attack patients. I employ panel data models using patient discharge and hospital financial data from California (1999-2006). My results indicate that uninsured patients have an economically significant effect that increases the mortality rate of insured heart attack patients. I show that these results are not driven by alternative explanations, including reverse causality, patient composition effects, sample selection or unobserved trends and that they are robust to a host of specification checks. The primary channel for the observed spillover effects is increased hospital uncompensated care costs. Although data limitations constrain my capacity to check how hospitals change their provision of care to insured heart attack patients in response to reduced revenues, the evidence I have suggests a modest increase in the quantity of cardiac services without a corresponding increase in hospital staff.     

Self-pay markets in health care: consumer Nirvana or caveat emptor?

As consumers face more incentives to make cost-conscious medical care decisions, some policymakers cite self-pay markets as models for consumer shopping. An analysis of the LASIK market revealed limited shopping overall, despite the fact that patients pay the full cost. For other self-pay procedures, consumers shop even less, for reasons ranging from urgency, to costs of obtaining price quotes, to quality concerns that prompt many consumers to rely on word-of-mouth recommendations. Given that consumer shopping is not prevalent in most self-pay markets, we expect the extent of shopping to be even more limited for many services covered by insurance.     

Restrictive reimbursement policies and uncompensated care in California hospitals, 1981-1986

To examine the effect of restrictive state, federal, and private hospital reimbursement policies in California, we examined trends in uncompensated care and other deductions from hospital revenues from 1981 to 1986. During a period when the number of uninsured in California increased substantially, uncompensated care grew, but not as rapidly as other deductions from revenue, especially Medi-Cal and private-sector contractual allowances. A trend toward redistribution of uncompensated care from public to private hospitals reversed. Voluntary teaching hospitals, whose Medi-Cal and private-sector contractual allowances grew rapidly, recently reported a decline in uncompensated care. As reimbursement pressures increase, private hospitals may resist pressures to provide uncompensated care, increasing the burden on public institutions and perhaps limiting the access of indigents to quality care.