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					                                                                                                                        Vol. VII, No. 3
                                                                                                                            June 2004




                                         findings brief
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                                         Safety Net “Crowding Out” Private Health
                                         Insurance for Childless Adults
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                                         The health care safety net—which includes         children are eligible for either Medicaid or
           Because so many               public hospitals, community health centers,       the State Children’s Health Insurance
                                         local clinics, and some primary health care       Program (SCHIP),” he says, “even when
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     low-income children are             physicians—is “crowding out” (replacing)          they access safety-net providers, the doctors
   eligible for either Medicaid          other insurance options for unmarried child-      can usually get them enrolled in the appro-
                                         less adults nationally, according to new          priate program.”
      or the State Children’s            research by Anthony Lo Sasso, Ph.D., and
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                                         colleagues at Northwestern University.            Background
  Health Insurance Program,                                                                The safety net consists of a patchwork of
                                         The researchers examined the effect of            providers that is supported by a diverse and
      even when they access              uncompensated care provided by clinics and
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                                                                                           often haphazard array of funding mecha-
        safety-net providers,            hospitals on insurance coverage for two           nisms. Although their funding may be
                                         groups: children under age 14, and unmar-         uncertain from year to year, or administra-
      the doctors can usually            ried childless adults age 18–64. They found       tion to administration, safety-net providers
                                         that the adults with good access to safety-net    generally offer a combination of comprehen-
     get them enrolled in the            services were less likely to have health care     sive medical care and enabling services, such
                                         insurance.                                        as language translation and transportation,
       appropriate program.
                                                                                           which target the needs of those likely to
                                         “Some of these people may think, ‘I’m             require safety-net health care.
                                         young. I’m healthy. I have better things than
                                         health insurance to spend my money on,’”          Federal grants to federally qualified health
                                         says Lo Sasso. “And they know that the safety     centers (FQHCs) grew steadily throughout
                                         net will be there if they become ill or injured   the 1990s, from about $550 million in 1990
                                         and need care.”                                   to $925 million in 1999.1 FQHCs have also
                                                                                           been on President Bush’s health care agenda
                                         However, the researchers only found weak          for the past few years.
                                         evidence that children are being crowded out
                                         of private or public insurance coverage.          “The safety net clearly has a purpose and a
                                         Children in need of health care services typi-    place in the American health care system,”
                                         cally have more insurance options than do         says Lo Sasso. “But it is not without risks.”
                                         adults, particularly public insurance cover-      It is an informal, uncoordinated system of
                                         age. “Also, because so many low-income            care whose continued existence is not guar-
AcademyHealth is the national program
office for HCFO, an initiative of
The Robert Wood Johnson Foundation.
findings brief — C h a n g e s i n H e a l t h Ca r e F i n a n c i n g & O r g a n i z a t i o n                             page 2


                                      anteed, he says, and many argue that it is       reasons for why take-up of private insurance
                                      stretched thin even today. Indeed, between       is so low for these groups.
                                      1990 and 1998, FQHCs witnessed a 60 per-
                                      cent increase in the number of uninsured         “We knew that substitution was occurring
                                      patients.2                                       within public programs,” says Lo Sasso,
                                                                                       “but very few studies had really examined
                                      Meanwhile, in the 1990s, expansions in           whether the safety net may also be playing a
                                      Medicaid and the creation of SCHIP allowed       crowd-out role.”
                                      many individuals who were covered under
                                      private insurance to be eligible for public      FQHCs provide a substantial amount of
                                      programs. The premiums for public cover-         uncompensated care. Overall uncompensated
                                      age were more affordable than for private,       care provided by FQHCs increased from
                                      and, in some cases, the health care delivered    about $450 million in 1990 to nearly $700
                                      may have been better—leading many to             million in 2000 (see Figure 1). Hospitals
                                      speculate that public coverage was crowding      also provide a large amount of uncompen-
                                      out private. Because so many low-income          sated care annually. Hospital uncompensated
                                      people continue to be uninsured despite the      care increased from just under $19 billion in
                                      expansions in program eligibility, however,      1990 to nearly $21 billion in 2000 (see
                                      the researchers wanted to identify alternative   Figure 2).




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                                        Figure 1: FQHC Uncompensated Care, 1990–2000
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                                        (Y2000 in Real Dollars)
                                        $750 million

                                       $650 million
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                                        $550 million

                                       $450 million
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                                        $350 million
                                                        1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
                                                            FQHC Uncompensated Care
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                                        Figure 2: Hospital Uncompensated Care, 1990–2000
                                        (Y2000 in Real Dollars)
                                        $21.5 billion

                                        $21.0 billion

                                        $20.5 billion

                                       $20.0 billion

                                        $19.5 billion

                                        $19.0 billion

                                        $18.5 billion
                                                        1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
                                                            Hospital Uncompensated Care
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Methods and Findings                              greater costs than Medicaid or safety-net
The researchers sought to answer the fol-         care, both in terms of premiums and out-
lowing questions:                                 of-pocket costs, such as deductibles and co-
                                                  payments. Therefore, a dependable safety
G   How do the structure and characteristics      net may result in workers accepting
    of the health care safety net affect          employment without health insurance, or
    employees’ decisions to accept employer-      declining coverage offered by their employ-
    offered health insurance?                     ers because of the cost.

G   How do these characteristics affect deci-     Moreover, for many workers in low-wage
    sions to accept employer-offered insur-       jobs, private insurance isn’t offered by their
    ance for their families, particularly their   employer. When it is offered, premiums
    children?                                     and deductibles often make it cost-prohibi-
                                                  tive. Buying coverage in the individual
G   How do these characteristics affect           insurance market is similarly expensive.
    employers’ decisions to offer health          Evidence from the Survey of Income and
    insurance and characteristics of that cov-    Program Participation suggests that among
    erage?                                        people who lose health insurance coverage,
                                                  60 percent indicated that the reason is that
The researchers used data from the March          insurance is too expensive.




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Current Population Survey (CPS) Annual
Demographic File to measure health insur-         From the employers’ perspective, the pres-
ance coverage over the years 1990 to 2000.        ence of a safety net may affect their deci-
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The CPS data were combined with detailed          sion to offer coverage. They may come to
measures on health care facilities to exam-       rely on the safety net as a substitute to pro-
ine the link between safety-net characteris-      vide care for their low-income workers—
tics and private health insurance coverage.       which saves them money. Small employers
The researchers’ primary safety-net mea-          in a particular area may in turn choose not
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sures included total hospital uncompensat-        to offer health insurance to workers
ed care derived from the American                 because of the availability of safety-net
Hospital Association’s annual survey of           health care services.
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hospitals and uncompensated care provid-
ed by FQHCs.                                      In ongoing research, Lo Sasso and col-
                                                  leagues will take a closer look at the
Their results provide mixed evidence on           employer side of the equation through the
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the extent of crowd out; hospital uncom-          insurance component of the Medical
pensated care does not appear to crowd out        Expenditure Panel Survey. Are employers
coverage for children or adults, while            backing away from offering insurance in
health center uncompensated care appears          communities where a strong safety net is
to crowd out private coverage for childless       in place? And how is a “strong” safety net
adults. “Less crowd out for hospital uncom-       defined? The researchers hope to under-
pensated care may be plausible,” says Lo          stand the extent to which the presence of a
Sasso, “given that most hospital uncom-           safety net will affect employers’ decisions
pensated care pays for big-ticket items           to offer insurance and what plans they
rather than more routine care that individ-       might offer.
uals may think of when making coverage
decisions.”                                       Conclusion
                                                  For many policymakers, one of the most
Getting Around Insurance                          challenging aspects of safety-net care is
According to Lo Sasso, low-income people          striking the right balance between promot-
frequently believe that they can avoid the        ing appropriate take up of safety-net ser-
need for health insurance by using free           vices and preventing crowd out of other
clinics or public hospitals. Employer-pro-        coverage options. On the one hand, the
vided health insurance is likely to have          goal and the role of safety-net institutions
                                                                                                                                           page 4


is to provide health care access to low-         insurance decisions of firms and individu-           About the Author
income Americans who cannot afford cov-          als,” says Lo Sasso. “We hope policymakers           LeAnne DeFrancesco is production manag-
erage through other vehicles. On the other,      will use the information to craft policies           er at AcademyHealth (www.academy-
however, a rich safety net may induce peo-       and provide incentives to providers to mini-         health.org) and the managing editor of
ple with access to other types of insurance      mize distortions in the private market               HCFO News & Progress. She can be reached
to forgo it for a seemingly “free” program.      while still providing care to those truly in         at 202.292.6700 or leanne.defrancesco
                                                 need.”                                               @academyhealth.org.
“Our analysis provides a unified framework
bringing together privately offered insur-       For more information, contact Anthony Lo             Endnotes
ance characteristics, Medicaid eligibility,      Sasso, Ph.D., at 847.467.3167, or a-losasso          1 Source: National Association of Community
and characteristics of the local safety net to   @northwestern.edu.                                     Health Centers, 1999.
better explain and understand the health                                                              2 Source: Bureau of Primary Health Care,
                                                                                                        1990, 1998.




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