Health reform has been slipping in the polls and now ranks behind Iraq and the economy. If the past is prologue, there is a good chance that this time next year we won’t be any closer then we are now. This raises an obvious question: What’s plan “B”?
In the past the default option has been to rely on our haphazard patch work of safety net providers to serve the uninsured while we continue to debate payment reform. President Bush summed this approach up well in a speech last year “I mean, people have access to health care in America. After all, you just go to an emergency room. The question is, will we be wise about how we pay for health care.” (www.whitehouse.gov/news/releases/2007/07/20070710-6.html)
Many people (including me) would argue providing emergency room care is a pretty meager standard. But even accepting this standard, it’s not clear how much longer the system can continue to deliver. The safety net is still there. But it is eroding fast. Many safety net providers are being pushed to the limit. Issues include not only the overall volume of care, but a mismatch between need and resources. Many of the hospitals that face the biggest uncompensated care burdens are those with the least ability to deal with them. The payer mixes of urban intercity hospitals and physicians are notorious. Some rural and even suburban hospitals and doctors face similar problems. On the demand side, the number of uninsured seems is almost certain to rise due to rising insurance costs, while a slowing economy is likely to make things worse. The bottom line is that going forward, we can’t count on the safety net to continue be there for the uninsured. If we want (yet again) to default to our traditional plan “B”, it seems like this time around we are actually going to have to plan for it.
How? One solution is simply to set up a program to target deserving providers and send money. But subsidy programs have a way of mushrooming (witness critical access hospitals) and Congress and the States could balk. You recently mentioned some ideas about redistributing the burden between providers as an alternative. I’d like to hear them.
We always knew it would come to this. When health care markets had little to no competition, nonprofit providers could easily make enough money to treat the uninsured. This hidden cross-subsidy was a fundamental feature of our health care system. Competition pressured providers to become efficient—thank goodness for that—but it also pressured them to cut back on charity care. Now that many providers are doing well financially, we have not seen a resurgence in charity care. If anything, many nonprofits are reinvesting their earnings in facilities designed to attract well-heeled patients, seeking even greater profits from the health care “haves” while abandoning the have-nots.
As you point out, I have been working on this problem with a number of government officials here in Illinois (they shall remain nameless so as to protect the innocent.) We are tinkering with some ideas that may help a little. Or maybe even a lot.
It all goes back to the traditional role of nonprofits in the U.S. health economy. In exchange for enormous tax breaks, nonprofits were supposed to provide community benefits. At one time, community benefits meant charity care. But the definition has expanded to include lots of activities that look more like loss leaders than true acts of charity. Here in Illinois, charity care is scarcely more than 10% of community benefits. But shouldn’t charity care be the #1 priority? Many nonprofits seem to have lost their way. No wonder some economists call them “for profits in disguise.”
So why don’t we ask the nonprofits to once again earn their tax exemptions? Either provide charity care or, if they prefer, form financial partnerships with saftey net providers. The level of support would be based on the hospital’s total revenues and the system can be run entirely through the private sector. I call this the “floor and trade” system. There might be exemptions for providers that are struggling to make ends meet or those that are already doing their part by treating a lot of Medicaid patients. There are likely lots of good ways to tinker with this approach on the margins. But I am optimistic about the basic idea.
Illinois has CON, which raises one more possibility. CON protection grants a certain degree of market power. Why not require recipients of CON approval (and, therefore, beneficiaries of future protection) to also pay into the floor and trade system? I have proposed an across-the-board requirement, not just limited to nonprofits. Ambulatory surgery centers, specialty hospitals, you name it. If the state grants you special rights, then give something back.
Competition still works in all the ways we hoped it would. But competition combined with a lack of political will has wreaked havoc with the safety net. I think that my proposal preserves the best of competition while doing something for the have-nots.