GOVERNMENT & MEDICINE

Report warns of breakdown of health care safety net

The unofficial health system serving the poor and uninsured needs coordination and an influx of cash to prevent its collapse, says an IOM report.

By Susan J. Landers, AMNews staff. April 17, 2000. Additional information

Washington -- The informal safety net that provides the nation's free and low-cost health care is being severely tested by a convergence of events: a burgeoning population of uninsured people, the expansion of Medicaid managed care and the erosion of important government subsidies, concludes a new Institute of Medicine report.

"Just about anybody who is a safety net provider has serious financial concerns," said Thomas G. Irons, MD, a pediatrician in Greenville, N.C., who served on the IOM panel that wrote the report.

Clinics and physicians who have served as eastern North Carolina's health care safety net for more than 20 years are examples of those now facing threats to their existence, Dr. Irons said.

The massive floods in North Carolina last year pointed out the vulnerability of the area's health care system. "In a sense it provided a wake-up call," Dr. Irons said. Since then, a public and private partnership has been developing a plan to provide care for the poor. The plan is expected to be implemented soon in at least two counties and could be expanded later.

Safety net providers are filling a void in the health care system, said the IOM panel's chair, Stuart H. Altman, PhD, a professor of national health policy at Brandeis University, Waltham, Mass.

"In the absence of universal, comprehensive health coverage, we have come to rely on the safety net to catch some of the nation's most vulnerable populations," he said.

Important roles

The core safety net providers include public hospitals; federal, state and locally supported community health centers or clinics; and local health departments. Teaching and community hospitals, private physicians and ambulatory care sites also play important roles in many communities, the report says.

The panel's findings echo statements made by the AMA for the past few years, said Trustee J. Edward Hill, MD. "We've been saying that the safety net is deteriorating, and more people are becoming uninsured all the time," he said. "Unless we make some fundamental reforms in benefit coverage for those losing their health insurance, the problem will get worse."

The nation's public hospital system applauded the report. "It is extremely gratifying that one of America's most prestigious nonpartisan national health research organizations has for the first time focused its attention on the growing crisis facing safety net providers," said Larry S. Gage, president of the National Assn. of Public Hospitals and Health Systems.

The report recommends that federal, state and local policymakers take several steps to protect the safety net.

Among the recommendations is an independent, nonpartisan oversight board to track and monitor local safety net providers. Panelists suggested that the board could be modeled on the Medicare Payment Advisory Commission, which assists Congress in tracking the Medicare program.

A grant program also could be established to help hospitals and clinics upgrade equipment, repair buildings and establish patient record systems. The report recommends financing the grants for a minimum of $2.5 billion over five years with funds from the federal budget surplus.

Panelists praised the Clinton administration's new Community Access Program, which was funded for the first time this year at $25 million. The program, which also is intended to shore up the nation's safety net, has received applications from nearly 2,000 health care organizations from around the country but will be able to provide funding to only 20 or 30.

Overburdened and underfunded

The increase in the number of uninsured Americans to 44 million last year placed an enormous strain on the nation's safety net, says the report. Between 1988 and 1998, the number of uninsured people grew by 20%, and many have been turning to safety net providers for their health care.

The jump in the number of patients needing care occurred as federally mandated budget cuts were hitting many clinics and hospitals.

The 1997 Balanced Budget Act required that subsidies for primary care health clinics be phased out over five years. So far, says the report, the subsidy levels have dropped by 5%. But Congress recently placed a two-year moratorium on further cuts.

In addition, Medicaid payments to hospitals that serve a large number of low-income people were cut significantly by the budget act, says the report. The reductions are expected to total $10.4 billion over five years.

Physicians who derive a major share of their revenue from managed care also are cutting back on their charity work, the report says, "placing even more pressure on an already strained safety net system."

The panel found that the rapid growth of Medicaid managed care has placed safety net providers in an even greater financial bind, a problem the AMA also had detected.

"The growth of Medicaid managed care has threatened the viability of the safety net in many communities," AMA Executive Vice President E. Ratcliffe Anderson Jr., MD, told Nancy-Ann DeParle, administrator of the Health Care Financing Administration, in comments on HCFA's proposal to regulate Medicaid managed care.

States have turned to managed care as a way to save money in the joint state and federal program, and the result has been an influx of new health plans and hospitals seeking to tap into the Medicaid funding stream.

While the new plans increase the choices available to Medicaid recipients, they also siphon many recipients away from health care providers who traditionally had cared for low-income people and had relied upon Medicaid payments to subsidize free care for uninsured people.

The report cites a study of 39 public hospitals that lost 12% of their Medicaid patients -- paying customers -- between 1993 and 1997, while seeing a 6% increase in the numbers of uninsured.

Medicaid managed care also has generated lower payment rates for physicians and other health care providers. The pay cuts are potentially serious, says the report, as Medicaid represents about one-third of the income for safety net providers.

Back to top.

A new report by the National Academy of Sciences' Institute of Medicine charges that the safety net of clinics and hospitals serving the nation's poor is in danger and needs help.

The problem

• Increased numbers of uninsured people.
• Cuts in federal subsidies to hospitals and clinics.
• Growth of Medicaid managed care.

The solution

• Establish a federal oversight board to monitor safety net providers.
• Distribute grants to repair infrastructure.

Back to top.

Information on the report, "America's Health Care Safety Net: Intact but Endangered," is on the National Academies site (http://www.national-academies.org/).

Back to top.

Box: Fraying safety net

Weblink