December 2003/Issue 8 Translating Research to Policy Expanding Access to Health Insurance Coverage Lessens the Burden of Uncompensated Care BACKGROUND State governments have financed the provision of uncompensated care by public The latest Census Bureau reports indicate hospitals and other providers in a variety of that the number of Americans without ways, and to a lesser and greater extent. health insurance is on the rise, up 2.4 Some states have increased direct payments million to 43.6 million in 2002. This to safety net hospitals; implemented increase—the largest in a decade—can be uncompensated care pools; provided tax attributed to continued erosion in the subsidies (especially to public and teaching number of people covered by employer- hospitals); and utilized Medicare and sponsored insurance. Responding to both a Medicaid disproportionate share (DSH) sluggish economy and double-digit growth payments. Many states have also used more in health insurance premiums, employers fundamental strategies of expanding public have increased cost sharing requirements, health insurance programs for the poor and pared down benefit sets, and, in some near-poor to both increase access to coverage cases, dropped coverage altogether. and reduce uncompensated care burdens. (Commonwealth Fund, 2002; Census Bureau, 2003) The link between increased access to insurance and reduced levels of The emergence of national health reform uncompensated care for hospitals seems as a major campaign issue for 2004 intuitive, at least on its face. Yet surprisingly presidential hopefuls shows that once again, few studies in the research literature address health care is a significant concern for the this relationship. The following issue brief American public. But policy makers at all describes how the State Health Data levels of government have many reasons Assistance Center (SHADAC) tested the to be concerned about the rising number hypothesis by assessing the impact that of uninsured. Research confirms that enrollment in the MinnesotaCare program— individuals without stable or adequate a state-subsidized insurance program for the health insurance are more likely to delay working poor—had on levels of seeking needed care until conditions are uncompensated care provided by Minnesota advanced, have poorer health outcomes, and hospitals over time. are more costly to treat than those with stable coverage. (Institute of Medicine, MINNESOTACARE: MINNESOTA’S 2002-2003) In 2000, hospitals alone spent as much as $21.6 million (American HEALTH CARE EXPANSION FOR Hospital Association, 2002) on THE WORKING POOR uncompensated care, costs that are ultimately shifted to private sector insurers, Enacted in 1992, the MinnesotaCare public programs, employers, employees, program was established in response to a and taxpayers. growing concern over the number of uninsured, low-income individuals in the state. When ownership, admission levels, and out-of-pocket the program began, it covered outpatient services—and charges), as well as county demographics (such as shortly thereafter, inpatient services—for families poverty, unemployment rates, age, race, ethnicity, and with children whose income was at or below 185 enrollment in other public programs). Statistical percent of the Federal Poverty Guidelines (FPG). methods were used to isolate the independent effect Today, MinnesotaCare covers families with children MinnesotaCare enrollment had on uncompensated and pregnant women under 275 percent of FPG, care spending, holding constant other factors believed adults without children under 75 percent of FPG, and, to influence this spending. with a more limited benefit set, adults without children between 75 and 175 percent of FPG. Except for Our research suggests that MinnesotaCare enrollment the lowest income families that pay a fixed nominal had a significant effect in reducing uncompensated care yearly enrollment fee, all other program enrollees costs in the state. Specifically, we found that a one pay premiums determined on a sliding scale basis, percentage-point increase in MinnesotaCare enrollment accounting for differences in household size, income, was correlated with a $2.19 decrease in uncompensated and number of people covered. (MN Dept. of Human care spending per capita. Figure 1 illustrates this point: Services, 2003) as MinnesotaCare enrollment grew between 1992 and 1996, uncompensated care levels declined. In its infancy, funding for MinnesotaCare came almost exclusively from a tax placed directly on the gross What does this relationship mean for policy makers private patient revenues of hospitals and health care and others concerned with health care access issues? providers referred to as the “provider tax”. Over time, During the 1992-1996 time period of increases in the state also obtained federal matching funds for MinnesotaCare enrollment, this analysis suggests certain groups of enrollees through its §1115 Medicaid reductions in uncompensated care spending—or, demonstration waiver (1995), and more recently, hospital cost savings—of roughly $58.6 million. As through available State Children’s Health Insurance Figure 2 illustrates, with the MinnesotaCare program, Program (SCHIP) allocations (2001). In state fiscal hospitals spent $58.6 million less on uncompensated year 2002, 57 percent of MinnesotaCare funding came care than they would have without the program. The from provider tax revenue, and the remainder came magnitude of these savings for Minnesota hospitals is from federal financial participation (37 percent), and considerable, and implies that 60 to 100 percent of the enrollee premiums and other revenues (6 percent). actual spending on hospital services for MinnesotaCare enrollees during this period would have been realized ASSESSING THE LINK BETWEEN as uncompensated care costs by the state’s hospitals in the absence of the program. MINNESOTACARE ENROLLMENT AND UNCOMPENSATED CARE SPENDING IMPLICATIONS FOR THE POLICY DEBATE Our analysis tested whether an increase in public AND RESEARCH AGENDA program enrollment resulted in reduced hospital uncompensated care costs. Using data from 1992 to Originally, some proponents of the financing 1996, SHADAC used multivariate regression analysis mechanism contended that the provider tax would to estimate the effect that enrollment in the “redistribute” health care system dollars toward MinnesotaCare program had on per capita hospital increased insurance coverage and away from uncompensated care costs. The early, rapid-growth uncompensated care, thus reimbursing providers with years of the program were used in our analysis to increased patient care revenues. Since the program’s maximize the likelihood of detecting this kind of inception, however, some provider groups have argued relationship, should one exist. The analysis controlled against the tax on the grounds that it unfairly targets a for certain hospital characteristics (such as size, burden that should be spread more broadly across the state’s population. Our findings—namely that MinnesotaCare enrollment has significantly reduced potential benefits of reduced uncompensated care hospital uncompensated care burdens in the state— burdens for hospitals and other providers. Additional provide evidence that the initial policy rationale behind research should also evaluate the impact of state access the provider tax was sound. initiatives such as the State Children’s Health Insurance Program (SCHIP) to determine whether the findings Beyond Minnesota’s borders, our results suggest that in Minnesota can be duplicated in other states. At least health policy and budget analysts evaluating the costs in theory, provider savings in uncompensated care costs and benefits of state-level eligibility expansions—either due to SCHIP enrollment may be passed on to insurers prospectively or retrospectively—should consider the and ultimately, health care consumers. NOTES American Hospital Association. “The State of Hospitals’ Financial Health.” Washington, D.C.: American Hospital Association, 2002. J. Edwards. et al. “The Erosion of Employer-Based Health Coverage and the Threat to Workers’ Health Care.” The Commonwealth Fund, August 2002. Institute of Medicine. “Care Without Coverage: Too Little, Too Late.” Committee on the Consequences of Uninsurance, Board on Health Care Services. Washington, D.C.: National Academy Press, 2002. Institute of Medicine. “Hidden Costs, Value Lost: Uninsurance in America.” Washington, D.C.: National Academy Press, 2003. Malcolm, J.K., “Uncompensated Health Care in Minnesota. An Interim Report to the Legislature.” St. Paul, Minnesota: Health Economics Program, Minnesota Department of Health, 1999. Minnesota Department of Human Services website, http://www.dhs.state.mn.us/ U.S. Census Bureau. “Health Insurance Coverage in the United States: 2002.” September, 2003. http://www.census.gov/hhes/www/hlthin02.html The State Health Access Data Assistance Center at the University of Minnesota promotes the effective use of available data to inform the debate on health coverage and access. A complete account of this study has been published: Blewett, Lynn A., Gestur Davidson, Margaret E. Brown, and Roland Maude-Griffin. “Hospital Provision of Uncompensated Care and Public Program Enrollment.” Medical Care Research and Review, December 2003, 60 (4), 509-27. State Health Access Data Assistance Center (SHADAC) | University of Minnesota School of Public Health 612-624-4802 | fax: 612-624-1493 | www.shadac.org IB-08-1203