Safety net services could replace private insurance

Consequences of policies need to be considered

One unintended consequence of the nation’s health care safety net — which includes public hospitals, community health centers, local clinics, and some primary care physicians — is that it is crowding out, or replacing, other insurance options for unmarried childless adults, according to new research by Anthony Lo Sasso, research associate professor at the Institute for Policy Research at Northwestern University in Evanston, IL.

According to an issue brief published by Academy Health, national program office for the Princeton, NJ-based Robert Wood Johnson Foundation’s initiative — Changes in Health Care Financing and Organization, Lo Sasso and colleagues examined the effect of uncompensated care provided by clinics and hospitals on insurance coverage for two groups: children younger than 14 and unmarried childless adults between 18 and 64.

They found that adults with good access to safety net services were less likely to have health insurance. "Our analysis provides a unified framework bringing together privately offered insurance characteristics, Medicaid eligibility, and characteristics of the local safety net to better explain and understand the health insurance decisions of firms and individuals," Lo Sasso says. "We hope policy-makers will use the information to craft policies and provide incentives to providers to minimize distortions in the private market, while still providing care to those truly in need," he adds.

Unintended consequences of programs

Sometimes, policy-makers are not aware of the unintended consequences on the private sector of decisions made on public programs, and his research is intended to highlight those consequences and urge that they be considered, Lo Sasso continues.

In contrast to the situation with adults, the researchers found only weak evidence that children are being crowded out of private or public insurance. Children in need of health care services typically have more insurance options than do adults, according to the researchers, particularly public insurance coverage. In addition, because so many low-income children are eligible for either Medicaid or the State Children’s Health Insurance Program (SCHIP), any safety net providers they see usually are able to get them enrolled in the appropriate program. Lo Sasso says the safety net is a patchwork of providers that is supported by a diverse and haphazard array of funding mechanisms.

Although their funding may be uncertain from year to year, or political administration to administration, safety net providers generally offer a combination of comprehensive medical care and enabling services such as language translation and transportation targeting the needs of those likely to require safety net care. "The safety net clearly has a purpose and a place in the American health care system," he explains. "But it’s not without risks."

Lo Sasso says he sees it as an informal, uncoordinated system of care whose continued existence is not guaranteed. Many would argue that it is stretched thin already, he adds. Witness the fact, for instance, that between 1990 and 1998, federally qualified health centers experienced a 60% increase in the number of uninsured patients. Then, in the 1990s, expansions in Medicaid and the creation of SCHIP allowed many individuals who were covered under private insurance to be eligible for public programs. Premiums for public coverage were more affordable than for private insurance and, in some cases, the health care delivered may have been better, leading many to speculate that public coverage was crowding out private.

Lo Sasso notes that because so many low-income people continue to be uninsured despite the expansions in program eligibility, the researchers wanted to identify alternative reasons for why take-up of private insurance is low for these groups. Federally qualified health centers provide a substantial amount of uncompensated care. Overall, uncompensated care they provided increased from some $450 million in 1990 to nearly $700 million in 2000. Hospitals also provide a large amount of uncompensated care annually; hospital uncompensated care increased from just under $19 billion in 1990 to nearly $21 billion in 2000.

Mixed evidence

Results of their study provided the researchers mixed evidence on the extent of crowd-out. Thus, hospital uncompensated care does not appear to crowd out coverage for children or adults, while health center uncompensated care appears to crowd out private coverage for childless adults. "Less crowd-out for hospital uncompensated care may be plausible," according to Lo Sasso, "given that hospital uncompensated care pays for big-ticket items rather than more routine care that individuals may think of when making coverage decisions."

According to the study, low-income people frequently believe they can avoid the need for health insurance by using free clinics or public hospitals.

Employer-provided health insurance likely is to have greater costs than Medicaid or safety net care, both in terms of premiums and out-of-pocket costs such as deductibles or copayments. Therefore, a dependable safety net may result in workers accepting employment without health insurance or declining coverage offered by their employers because of the cost. Also, for many workers in low-wage jobs, employers don’t offer private insurance; and when it is offered, premiums and deductibles often make it cost-prohibitive. Buying coverage in the individual insurance market is similarly expensive.

From employers’ perspective, the availability of a safety net may affect their decision to offer — or not offer — coverage. They may come to rely on the safety net as a substitute to provide care for their low-income workers, which saves them money.

Small employers in a particular area may choose not to offer health insurance to workers because of the availability of safety net health care services.

Academy Health said that for many policy-makers, one of the most challenging aspects of safety net care is striking the right balance between promoting appropriate take-up of safety net services and preventing crowd-out of other coverage options. On one hand, the goal and role of safety net institutions is provide health care access to low-income Americans who cannot afford coverage through other vehicles, the report said. On the other hand, a rich safety net may induce people with access to other types of insurance to forgo it for a seemingly free program.

[For more information on safety net services, contact Anthony Lo Sasso at (847) 467-3167 or e-mail him at a-losasso@northwestern.edu.]