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Chapter 4 - Financial Support for Safety Net Services

Introduction

Low-income individuals receive their health care in several ways. Health care services may be provided free or on a sliding-scale basis for uninsured individuals at clinics or health centers whose mission is to serve the low-income population. Hospitals and private doctors' offices may provide reduced-price or free charity care or may write off unpaid medical debts of individuals who cannot afford their services. For individuals covered by Medicaid or a State Children's Health Insurance Program, services may be provided on a fee-for-service basis or through a managed care organization. However, the waiting time for a clinic appointment can be several weeks, doctor's offices and hospitals may limit the amount of charity care they provide, and health care is a significant source of debt for many low-income families.

Financial support for safety net services comes in many forms, from insurance-type reimbursement or managed care arrangements in programs such as Medicaid, to grants that fund Community Health Centers (CHCs), to the distribution of funds from State uncompensated care pools. Additional support may come in the form of personnel, such as clinicians from the National Health Service Corps, or from drug assistance programs. Each of these types of support has a considerable influence on the health care delivery system in a local area, including the types of providers and services available to care for the low-income population. This book uses several measures to capture various aspects of financial support for safety net services:

  • An index of the extent of Medicaid coverage for each State based on income eligibility requirements.
  • The percent of the population under age 65 with family incomes below 200 percent of the Federal poverty line that is enrolled in Medicaid.
  • Medicaid expenditures per person under age 65 with family incomes below 200 percent of the Federal poverty line (excludes long-term care expenditures).
  • Medicare Disproportionate Share Hospital (DSH) payments per person with family incomes less than 100 percent of the Federal poverty line; these are additional Medicare payments to hospitals that treat a high percentage of low-income patients.
  • Presence of a CHC.
  • Uncompensated care pooling.

Additional details on each of these measures are available in "Appendix A: Technical Information."

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Variation in Financial Support for Safety Net Services

Table 4-1 displays Medicare DSH payments per person below the Federal poverty line. DSH payments per person below poverty vary considerably, with cities having average payments that are nearly 2.5 times higher than their surrounding suburban areas, reflecting the fact that more low-income people live and receive health care in cities than in suburbs. DSH payments also differ by region, ranging from an average of $95 per poor person in the Midwest to $159 in the Northeast. Variation is lowest in cities and in the West. Figure 4-1 shows DSH payments for the 90 metropolitan areas included in this book, with a subset of areas labeled. A considerable number of counties receive no DSH funds. Among the counties included in this book, 34 percent of those with hospitals received no DSH funds. DSH payments are highest in the Raleigh-Durham-Chapel Hill, NC, Metropolitan Statistical Area (MSA), reaching $745 per person below poverty in Durham County, NC.

Table 4-1: Disproportionate Share Hospital Payments Per Person Below Poverty by Area Type and Region, 1999

Area Range of Variation Average
Index* High Low High/Low
MSA0.498$446$0a$134
Suburban County1.331$598$0a$69
Metropolitan County**0.599$745$0a$169
Northeast0.824$597$0a$159
South0.997$745$0a$138
Midwest0.728$224$0a$95
West0.483$236$0a$132
All Areas0.812$745$0a$134

*Coefficient of variation: an index that measures the amount of variation (higher = more variation).
**Metropolitan counties are those counties in metropolitan areas containing a city with 100,000 or more people.

Figure 4-1: Disproportionate Share Hospital Payments Per Person Below Poverty Metropolitan Areas, 1999

Figure 4-1: Disproportionate Share Hospital Payments Per Person Below Poverty Metropolitan Areas, 1999
[D] Select for Text Description.

Figure 4-2 illustrates regional differences in the extent of Medicaid coverage. A higher value represents greater income eligibility levels. This index averages 1.116 across all 30 States included in this book and is highest in the West.

Figure 4-2: Extent of Medicaid Coverage Average by Region, Metropolitan Areas, 1997

Figure 4-2: Extent of Medicaid Coverage Average by Region, Metropolitan Areas, 1997
[D] Select for Text Description.

The variation in Medicaid enrollment for individuals with family incomes below 200 percent of the Federal poverty line is shown in Table 4-2. Medicaid enrollment depends on State policies regarding eligibility and verification of eligibility, outreach programs that encourage people to enroll, and a host of other factors. On average, 35.1 percent of low-income individuals in all the MSAs in this book are covered by Medicaid. While the average varies from 29.1 percent in the South to 40.8 percent in the Northeast, there is considerable variation within each of the Census regions. The variation in the percent of the low-income population covered by Medicaid ranges from a high/low ratio of 3.21 in the Midwest to 4.59 in the South. The South has the highest regional index of variation at 0.363. Figure 4-3 illustrates Medicaid enrollment for all 90 metropolitan areas included in this book, with a subset labeled. Las Vegas, NV, has the lowest and Lansing-East Lansing, MI, has the highest proportion of low-income residents enrolled in Medicaid.

Table 4-2: Percent of Population Below 200 Percent of Poverty With Medicaid Coverage, MSAs by Region, 1999-2001

Area Range of Variation Average
Index* High Low High/Low
Northeast0.25769.2%17.3%3.9940.8%
South0.36371.1%15.5%4.5929.1%
Midwest0.28474.3%23.1%3.2140.1%
West0.31965.0%15.0%4.3232.3%
All MSAs0.33374.3%15.0%4.9435.1%

*Coefficient of variation: an index that measures the amount of variation (higher = more variation).

Figure 4-3: Percent of Population Below 200 Percent of Poverty on Medicaid Metropolitan Areas, 1999-2001

Figure 4-3: Percent of Population Below 200 Percent of Poverty on Medicaid Metropolitan Areas, 1999-2001
[D] Select for Text Description.

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How Financial Support for Safety Net Services Is Related to Safety Net Performance and Population Outcomes

Table 4-3 shows the association between each measure of financial support for the safety net and outcomes. Our measures of DSH payments per poor person all have a slight to low association with place/county-level outcomes, with an increasing amount of DSH funds being associated with higher potentially preventable hospitalization rates and higher rates of negative birth outcomes. At the MSA level, increasing DSH payments have a moderate association with more children's preventable hospitalizations, and a slight to low association with more adult preventable hospitalizations. This finding likely reflects the fact that both significant quantities of uncompensated care (and associated DSH payments) and negative health outcomes are concentrated in areas where low-income populations are disproportionately represented.

Table 4-3: Association Between Financial Support Measures and Outcomes (Place/County and MSA Levels)

Outcome Measure Association With Outcome Measures (R2)*
Disproportionate Share Payments Per Poor Person 1999 Extent of Medicaid Coverage 1997 Percent of Population Below 200 Percent of Poverty on Medicaid 1999-2001
Place/County Level Preventable Hospitalizations, Ages 0-170.063+0.050-n/a
Preventable Hospitalizations, Ages 18-390.043+0.035-n/a
Preventable Hospitalizations, Ages 40-640.065+0.035-n/a
Late or No Prenatal Care0.056+0.060-n/a
Low Birth Weight (Full-Term Births)0.079+0.023-n/a
Preterm Births0.040+0.045-n/a
MSA Level Preventable Hospitalizations, Ages 0-170.163+0.081-0.005
Preventable Hospitalizations, Ages 18-390.032+0.098-0.002
Preventable Hospitalizations, Ages 40-640.086+0.104-0.036+
Late or No Prenatal Care0.0190.101-0.002
Low Birth Weight (Full-Term Births)0.062+0.051-0.002
Preterm Births0.0010.085-0.007
No Usual Source of Care (Low Income)0.0600.0000.332-
No Physician Visit in Last Year (Low Income)0.0310.0150.176-

*The higher the R2, the stronger the association. The "+" and "-" indicate the direction of the association. A "+" indicates that the outcome/performance measure increases as the factor increases, and a "-" indicates that the outcome/performance measure decreases as the factor increases.
n/a = not applicable.

A greater extent of Medicaid coverage is associated with slight to moderate decreases in potentially preventable hospitalization rates and negative birth outcomes at both the place/county and MSA levels. The larger the proportion of the low-income population that is covered by Medicaid, the less likely the low-income population is to have access-related problems, including lacking a usual source of care and not having any physician visits; this association is moderate to strong.

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The Role of Community Health Centers

In 2001, CHCs funded by the Health Resources and Services Administration provided 40.2 million visits to 10.3 million largely low-income individuals. Table 4-4 displays the distribution of CHCs by county poverty status. Only 15.9 percent of the most well-off counties (with less than 6 percent of the population living below poverty) have CHCs. This percentage increases steadily as the proportion of the county's population living below poverty increases. More than 92 percent of all counties with 20 percent or more of their population living below poverty have a CHC.

Table 4-4: Community Health Centers and County-Level Poverty

Percent of County Population Below Federal Poverty Level, 2000 Percent of Counties With Community Health Centers, 1999
Less than 6 percent15.9%
6 percent to 9.9 percent51.7%
10 percent to 20 percent77.8%
More than 20 percent92.3%
All Counties56.6%

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How Do Uninsured Americans Pay for Health Care?

Forty-six million Americans, or 16.7 percent of the population, had no health insurance throughout the first half of 2001.1 Despite financial support for safety net services by Federal, State, and local governments, uninsured individuals may have considerable difficulty obtaining and paying for the health care they need. With negotiated discounts obtained by private insurers and fee schedules set under public programs, the uninsured are often the only group charged full price for services. Even in institutions which by law or internal policy treat all patients regardless of their ability to pay, uninsured patients may receive substantial bills for their care.

A recent report finds that three of every five uninsured individuals surveyed who received health care in an emergency department, a hospital outpatient department, or a sliding-scale health center needed help paying their medical bills, and that these needs were most substantial among those who received care in emergency or outpatient departments.2 Nearly half of all uninsured individuals in the study reported being in debt to the facility where they received care, with one-quarter saying that these debts would discourage them from seeking care there in the future. However, the report also finds that the more often individuals received staff offers of help in finding financial assistance, the less likely they were to report being in debt to that institution.


1 Data from the 2001 Medical Expenditure Panel Survey. Available at http://www.meps.ahrq.gov/mepsweb/data_stats/summ_tables/hc/hlth_insr/2001/alltables.pdf. Accessed February 18, 2009.
2 Andrulis D, Duchon L, Pryor C, Goodman N. Paying for health care when you're uninsured: How much support does the safety net offer? Boston: The Access Project, 2003.


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