Taking Steps, Losing Ground: The Challenge of New Yorkers without Health Insurance

Transcription

1 A Special Report from United Hospital Fund A SPECIAL REPORT Taking Steps, Losing Ground: The Challenge of New Yorkers without Health Insurance Kathryn Haslanger Robert E. Mechanic Mary Jo O Brien Kenneth E. Thorpe United Hospital Fund of New York

2 Copyright 1998 by the United Hospital Fund of New York All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise (brief quotations used in magazine or newspaper reviews excepted), without the prior written permission of the publisher. Printed in the United States of America. Library of Congress Cataloging-in-Publication Data Taking steps, losing ground: the challenge of New Yorkers without health insurance p. cm. Includes bibliographical references. ISBN: Insurance, Health New York (State) 2. Medical policy New York (State) I. United Hospital Fund of New York. II. Series: Special report (United Hospital Fund of New York) HG dc21 CIP For information, write, Publications Program, United Hospital Fund of New York, 350 Fifth Avenue, 23rd Floor, New York, NY

3 Contents Foreword, James R. Tallon, Jr. Acknowledgments v ix I. Recent Trends in Health Insurance Coverage in New York State 1 II. New York State s Evolving Health Care Policy and Market Environment 7 III. Options for Expanding Health Insurance Coverage 17 IV. The Challenges Ahead Appendices A: Tables: Trends in Health Insurance Coverage, B: Methodology 51 Notes 55

4 Foreword This report is intended to continue the discussion of a serious problem facing New Yorkers: the disturbing growth in the number of persons without health insurance coverage. It does not seek to conclude that discussion but rather to inform the debate ahead. Acknowledging substantial recent improvement in health insurance coverage available to children in New York, the report discusses the steps necessary to convert eligibility for coverage into reality and explores various strategies to expand coverage to other New Yorkers. The number of uninsured New Yorkers now stands at 3.1 million. One in six New Yorkers lacks health insurance coverage, a proportion that has grown precipitously since the beginning of the decade, at a rate that shows no signs of abating. Indeed a number of forces point to further escalations: the continuing problems of the individual health insurance market, declines in employer-sponsored health insurance, and drops in Medicaid coverage largely associated with welfare reform. Together these forces suggest that the growth in the number of uninsured persons in the years to come may far exceed the growth rates and proportions described here. Driven by a conviction of the urgency of this problem and the need for frank discussion, the United Hospital Fund began its Health Insurance Studies Project in June 1997 with three goals: to document the scope of the problem the numbers and the trends as well as the many steps that New York State has taken to address the problem; to examine the experience in other states; and to outline broad strategies that might be used to address the problem. We assembled an extraordinary team of analysts and advisors from the United Hospital Fund staff and elsewhere, recognized for their expertise on these and other health issues. On two occasions, we invited several dozen health care and public policy leaders to discuss and comment on the work. DEFINING THE PROBLEM The growth in the number and proportion of uninsured New Yorkers was not the only disturbing trend to emerge from our analysis. In addition, we discovered that: The proportion of uninsured persons in New York State is rising faster than the proportion of uninsured persons nationally. The rising percentage of uninsured persons in New York State is driven by a substantial erosion of private coverage. The decline in private coverage is widespread and affects workers in firms of almost all sizes, although small firms (fewer than 25 workers) experienced the largest reductions. v

5 Most uninsured adults work, and live in families with incomes below 200 percent of the federal poverty level. More than 285,000 children in New York State remain uninsured despite being eligible for Medicaid. These trends are taking shape within a rapidly evolving health care landscape. Among the forces reshaping New York s health care system are the New York Health Care Reform Act (HCRA) of 1996, which deregulated the state s hospital system; the New York Partnership Plan, which authorized the mandatory enrollment of Medicaid beneficiaries in managed care plans; recent federal welfare reform legislation and the Balanced Budget Act of 1997; New York s children s health insurance legislation; and reforms in New York s small group and individual insurance markets. Some of these developments make explicit provisions for maintaining access to health care for low-income and uninsured New Yorkers; others may compromise access to health care. As New York State moves forward, both vigilance and action are necessary: vigilance to ensure that the state s most vulnerable residents do not suffer unintended consequences, and action to explore ways to reverse the trends. OPTIONS FOR EXPANDING HEALTH INSURANCE COVERAGE In laying out possible options for expanding health insurance coverage in the state, we drew on the significant history and experience that exist in New York and other states. We eventually identified six possible strategies: Increase enrollment of currently eligible beneficiaries in existing public insurance programs. Expand Child Health Plus to cover parents of eligible children. Expand Medicaid to cover new populations. Offer premium subsidies directly to low-income individuals. Expand small employer premium subsidy programs. Support provider-based demonstration projects to manage charity care. Each of these options varies in terms of cost, the number of people who would be newly covered, and the population segments targeted (e.g., workers, single adults). But each of the options tries to satisfy four basic conditions that we felt were crucial. Each strategy relies, as much as possible, on policies that are within state control, focuses on low-income individuals, offers a benefit package comparable to those currently available to insured New Yorkers, and keeps participants contributions affordable. The options, along with the numbers of potential insured persons and costs, are presented in Chapter 3. Our intention was not to lay out a set of finely nuanced program alternatives, but to offer enough detail and analysis to stimulate further discussion grounded in a realistic assessment of the potential costs, budgets, and vi

6 design challenges. Although we are explicit about the potential advantages and disadvantages of each option, we do not champion one option over another. Indeed it is our expectation that the solution to this complex problem will be found in combinations of these and other strategies. A final note about costs: as the estimates in this report indicate, marginal increases in current expenditures will yield only limited gains; significant expansion of coverage will require a significant allocation of resources. We remain mindful of the challenges involved in substantially increasing private and public expenditures, but we also recognize the inescapable fact that expanding health insurance coverage will require additional spending. Choices related to increases in expenditures are always extremely difficult, but let us not forget that in this case the cost of inaction is particularly high. AN INVITATION TO DISCUSSION New York State has a rich tradition of broadly based public policymaking on health issues and a decades-old commitment to ensuring health care for all its residents. With this history, and with continued thoughtful discussion about the reasons for the growth in the number of uninsured persons and possible strategies for addressing the issue, we foresee a renewed effort to tackle this challenging public policy problem. We hope that this report and the options it describes will be a next step toward crafting workable solutions. JAMES R. TALLON, JR. President United Hospital Fund of New York vii

7 Acknowledgments This report is the product of many people s efforts. Kathryn Haslanger, director of the division of policy analysis at the United Hospital Fund, directed the research and analysis on which this report is based and was principally responsible for the report. Kenneth E. Thorpe, Ph.D., professor and director, Institute for Health Services Research, Tulane University School of Public Health and Tropical Medicine, produced the census tabulations and estimates of expansion strategies costs and people covered on which the report is based. Robert E. Mechanic and Mary Jo O Brien of The Lewin Group prepared preliminary drafts of the chapters describing New York s policy environment and the six options for expanding health insurance coverage in New York State. Judith Feder, Ph.D., professor, Georgetown University Medical Center Institute for Health Care Research and Policy, and Bruce C. Vladeck, Ph.D., professor of health policy and senior vice president for policy, Department of Health Policy, Mount Sinai Medical Center, are advisors to the United Hospital Fund s Health Insurance Studies Project. Phyllis Brooks, director of communications at the United Hospital Fund, edited the report. In addition, the following United Hospital Fund staff members contributed to the report: David A. Gould, Ph.D., senior vice president for program Joel C. Cantor, Sc.D., director of research Megan Toohey, health policy analyst Kathleen DeGuire, health policy assistant Kathleen Finneran, senior staff associate Steven Fass, financial analyst ix

8 Taking Steps, Losing Ground: The Challenge of New Yorkers without Health Insurance xi

9 I. Recent Trends in Health Insurance Coverage in New York State Employersponsored 52.7% Uninsured 17% Medicaid 14.4% Medicare 12.7% Individual 3.2% FIGURE 1. Health Insurance Coverage, New York State, 1996 Source: March 1997 Current Population Survey Note: Tabulation includes total population, all ages Since 1993, nearly every measure of U.S. economic performance has been positive. The unemployment rate has reached a 20-year low, and the annual rate of inflation has dipped below 2 percent. At least through 1997, several employee benefit surveys reported very low rates of growth in the cost of employer-based health insurance premiums. And while New York State was slower to recover from the recession of the early 1990s than the rest of the country, its economy, especially in the New York City area, has improved in the past few years. Despite these positive economic trends, the proportion of U.S. residents with health insurance has fallen, and the proportion of New Yorkers with health insurance has dropped precipitously. This chapter examines health insurance coverage among New Yorkers over time and the factors associated with recent declines. TRENDS IN COVERAGE AMONG NEW YORKERS In 1996, some 3.1 million New Yorkers nearly one in six were uninsured. Most New Yorkers received coverage through their employer (52.7 percent), while others relied on public programs, either Medicaid (14.4 percent) or Medicare (12.7 percent). A small proportion (3.2 percent) purchased health insurance themselves (Figure 1). By nearly any measure of health insurance coverage, New York State is worse off than it was at the beginning of the 1990s, and worse off than the nation as a whole. The ranks of the uninsured in New York grew by more than 900,000 people between 1991 and Excluding the population 65 years of age or older, almost all of whom are eligible for Medicare, the proportion of New Yorkers without health insurance stood at 19.1 percent in 1996, an increase of more than 40 percent since 1991, and 1.5 percentage points higher than the national rate of 17.6 percent. * In Estimating Health Insurance Coverage The tabulations in this report are based on the March supplements to the Current Population Survey (CPS), which are conducted by the U.S. Bureau of the Census. The CPS is the only nationally representative survey of health insurance coverage that also provides estimates at the state level. The CPS asks questions about health insurance coverage at any time during the last calendar year. The category of no coverage was designed to measure counts of the uninsured for an entire calendar year. However, the resulting counts of the uninsured are much closer to point in time estimates developed through several other national surveys. As a result, the estimates of health insurance coverage in this report are interpreted as coverage during a typical month. This interpretation is similar to that used by many analysts and groups, including the Congressional Budget Office. The tabulation methodology used in this report varies from that used by the Census Bureau in generating its reports, resulting in a higher number of uninsured persons with incomes below 200 percent of the federal poverty level, because census households have been reconfigured into health insurance units, generating a more accurate picture of income and coverage for analyzing health insurance status. Therefore, estimates from this report should not be used in combination with tabulations from other sources. (See Appendix B for detailed explanation of methodology.) *For the remainder of the analysis, data for the population aged 64 years and less are presented. These tabulations exclude those 65 years of age or older because of their near-universal access to Medicare. 1

10 percent of nonelderly population percent of nonelderly population % 11.9% 58.8% US NYS NYC US NYS NYC FIGURE 2. Percent of Nonelderly Population without Health Insurance, United States, New York State, and New York City, 1991 and 1996 Source: March 1992 and 1997 Current Population Survey US NYS US NYS US NYS US NYS US NYS Employer-Sponsored Uninsured Medicaid Medicare Individual FIGURE 3. Source of Health Insurance Coverage, Nonelderly Population, United States and New York State, 1996 Source: March 1997 Current Population Survey percent of nonelderly population 15.3% % 19.1% 16.3% 11.4% 2.0% 1.5% 72.2% 70.8% 13.4% 17.8% 69.1% 63.1% US NYS US NYS US NYS US NYS PUBLIC PRIVATE PUBLIC PRIVATE FIGURE 4. Public and Private Health Insurance Coverage, Nonelderly Population, United States and New York State, 1991 and 1996 Source: March 1992 and 1997 Current Population Survey contrast, the proportion of New Yorkers without health insurance coverage in 1991 was slightly lower (by 2 percentage points) than the national average (Figure 2). The coverage trends for New York City are even more alarming; the share of the population without health insurance jumped from 19.8 percent to 27.8 percent between 1991 and A recent survey sponsored by The Commonwealth Fund documents the consequences of being without health insurance in New York (The Commonwealth Fund, 1998). Uninsured adults were two to three times more likely to have problems with access to health care, and either went without needed care or experienced difficulty in obtaining it. Uninsured children were found to be at nearly three times the risk of encountering health care access barriers than insured children. The implications of delayed care or unmet need are pervasive; they can include days lost from work and school in the short term as well as impacts that can extend over a lifetime when chronic illness or developmental needs are involved. 5.3% 3.6% DECLINE IN PRIVATE COVERAGE The key to these trends is the substantial decline in private health insurance coverage (employer-sponsored insurance and individually purchased insurance).* The share of New Yorkers with either employer-sponsored or individually purchased insurance is lower than the share nationally (Figure 3), and the gap between New York and the nation grew markedly between 1991 and Nationally, the share of nonelderly persons with private insurance decreased by 3 percentage points, falling from 72.2 percent in 1991 to 69.1 percent in The reduction in private coverage during this period was steeper in New York, falling by 7.7 percentage points, from 70.8 percent in 1991 to 63.1 percent in While Medicaid coverage increased slightly, the gain in public coverage was much smaller than the decline in private coverage (Figure 4). *During 1995, the nature and sequencing of CPS questions concerning employer-sponsored and individual health insurance coverage changed. These changes redistributed some insurance coverage from individually purchased to employer-sponsored. As a result, the CPS questions concerning these measures are not strictly comparable over time. Therefore, the categories of individual and employer-sponsored coverage have been combined in this analysis and labeled as private coverage where trends are displayed. 2

11 percent of workers % % % 60.6% 77.1% 73.5% 83.8% 79.8% 86.6% 87.0% 91.0% 85.4% All Firms Employees Employees Employees Employees Employees The decline in private coverage was widespread; it affected workers in firms of almost all sizes. Among all workers in New York, 82.2 percent had private health insurance in 1990, compared to only 75.9 percent in 1996.* While the share of workers with private health insurance decreased in establishments of every size except those with 500 to 999 employees (Figure 5), the decline was most pronounced in small firms. In 1990, 72.5 percent of workers employed in firms with fewer than 25 employees received private FIGURE 5. Percent of Workers with Private Health Insurance, by Firm Size, New York State, 1990 and 1996 Source: March 1991 and 1997 Current Population Survey insurance, but only 60.6 percent of such workers had coverage in Medicaid expansion 4.8% Growth in premium and employee contribution 76.2% Income decline 9.5% Employment shifts 9.5% FIGURE 6. Factors Contributing to Reductions in Employer-Sponsored Coverage Source: Sheils, 1998 AFFORDABILITY OF HEALTH INSURANCE Research suggests that the decline in private coverage may reflect increases in the cost of premiums, as well as in employees required contributions (Figure 6). The increase in the number of uninsured persons that accompanies premium increases is well documented; and while premiums have been flat in recent years, rising premiums surely contributed to the growth in the number of uninsured persons earlier in the decade. More recent national data show that while many firms do not offer coverage, those that do are increasing the share of the premium that employees must contribute as well as raising individual and family deductibles (Gabel, 1998). Increasingly, workers cannot afford health insurance on the terms offered. Low-income families who do not receive coverage through their employer have limited options. While Medicaid coverage for children is slightly more expansive, parents income must be below the poverty level and single adults income little more than half the poverty level in order to qualify. And purchasing private coverage directly is not financially feasible. The cost, ranging from $384 to $864 per month, is prohibitive for a family of four living on $2,600 or less per month. Most uninsured families live at or below this income level. The Federal Poverty Level The federal poverty level, the federal standard for determining whether an individual or family is living in poverty, is based on the amount of pre-tax income an individual or family earns. The federal measure of poverty is determined by both the Census Bureau, which updates the poverty thresholds each year, and the U.S. Department of Health and Human Services, which issues poverty guidelines a simplified version of the thresholds in the Federal Register each year. The thresholds are used by the Census Bureau for statistical purposes to determine the number of Americans living in poverty. The guidelines are usually used to determine eligibility for public programs such as Medicaid. Programs using the federal poverty level often refer to a percentage of the federal poverty level when determining eligibility. For example, pregnant women and infants under one year of age who have family incomes below 185 percent of the federal poverty level are eligible for Medicaid in New York State. On the other hand, single childless adults in New York State must have incomes less than 53.5 percent of the federal poverty level in order to qualify for Medicaid. In 1996, an individual earning up to $7,740 per year and a family of four earning $15,600 per year were living in poverty according to the guidelines. Percent of the 1996 Federal Annual Income Poverty Level Individual Family of Four 100% $7,740 $15, % $15,480 $31, % $23,220 $46,800 *These figures represent private coverage from any source (e.g., through a spouse or purchased directly from an insurance company) and are not limited to coverage offered by each worker s employer. For example, some workers are not offered coverage by their employer but receive it through their spouse. 3

12 FIGURE 7. Poverty Status of Nonelderly Uninsured Population, New York State, 1996 Source: March 1997 Current Population Survey Note: FPL=federal poverty level 31.4% 47.9% 20.7% 31.0% 24.0% 45.0% 19.1% 7.2% 73.7% 0 100% % % 301%+ FPL FPL FPL FPL Private Health Insurance Public Health Insurance Uninsured 7.4% 2.1% 90.5% FIGURE 8. Source of Health Insurance Coverage, Nonelderly Population, by Poverty Status, New York State, 1996 Source: March 1997 Current Population Survey Note: FPL=federal poverty level Part-time part-year worker 8% % FPL 16% Part-time full-year worker 8% 300%+ FPL 17% % FPL 26% Non-worker 27% 0 100% FPL 41% Full-time part-year worker 16% Full-time full-year worker 41% INSURANCE AND INCOME LEVEL Income is an important predictor of health insurance coverage. Higher income New Yorkers are more likely to have health insurance coverage than lower income New Yorkers. Nearly all New Yorkers with incomes above 300 percent of the federal poverty level have some form of health insurance. In contrast, fewer than 70 percent of New Yorkers with incomes below the federal poverty level ($15,600 for a family of four) have some form of coverage, and most who do have coverage receive it through the Medicaid program. The relatively high rates of uninsurance among low- and middle-income families are particularly striking. Two-thirds of the uninsured live in families with incomes up to 200 percent of the federal poverty level (Figure 7). Among persons in this income range, more than 30 percent are without coverage (Figure 8). The likelihood of having private health insurance increases substantially when income exceeds 200 percent of the federal poverty level. While less than half of individuals with incomes between 101 and 200 percent of the federal poverty level have some form of private health insurance, nearly three-quarters of those in families with incomes between 201 and 300 percent of the federal poverty level have private health insurance, and more than 90 percent of those with incomes above 300 percent of the federal poverty level are privately insured. INSURANCE COVERAGE AND EMPLOYMENT While most private health insurance is tied to employment, employment does not necessarily lead to coverage. Those working full-time for the full year account for more than 40 percent of uninsured New Yorkers, and nearly three-quarters of uninsured adults were employed during the year (Figure 9). The probability of having health insurance is lower for those who are employed only sporadically during the year. For instance, almost 1 in 4 adults working part-time or part-year was uninsured during a typical month, compared to about 1 in 6 adults working full-time for the whole year (Figure 10). For coverage patterns among workers, the role of income is pronounced. Some 52 percent of full-time, full-year workers with incomes below the federal poverty level were uninsured during The Non-worker 50% Full-time full-year worker 16% Full-time part-year worker 17% Part-time part-year worker 9% Part-time fullyear worker 8% ALL UNINSURED PERSONS UNINSURED PERSONS WITH INCOMES BELOW THE FEDERAL POVERTY LEVEL FIGURE 9. Labor Force Attachment of All Nonelderly Uninsured Persons and Poor Nonelderly Uninsured Persons, New York State, 1996 Source: March 1997 Current Population Survey proportion of full-time, full-year workers without insurance remains relatively high through 200 percent of the federal poverty level: more than 40 percent of these workers with incomes between 101 and 200 percent of the federal poverty level were uninsured. The proportion without insurance falls to 23.7 percent for those with incomes between 201 and 300 percent of the federal poverty level and is lower still in higher income households (Appendix A, Table 6). 4

13 24.5% 75.5% 26.3% 73.7% Non-worker Part-time or Full-time, part-year full-year workers workers Insured Uninsured Percent of the Federal Category Poverty Level Pregnant women and infants 185% Children aged 1 to 5 years 133% Children aged 6 to 14 years 100% Children aged 15 to 21 years 87% Adults caring for children under 21 years 87% Other adults 53.5% Source: New York City Human Resources Administration Full-time full-year workers 63% 16.7% 83.3% FIGURE 10. Health Insurance Status of Nonelderly Population by Labor Force Attachment, New York State, 1996 Source: March 1997 Current Population Survey TABLE 1. Medicaid Income Eligibility Ceilings, New York City, June 1998 Full-time full-year workers 42% Part-time full-year workers 4% SINGLE CHILDLESS ADULTS MOST LIKELY TO LACK INSURANCE Adults are more likely than children to lack health insurance coverage, and single childless adults are more likely than those living in families with children to be uninsured. These findings reflect the long-standing direction of federal and state health policy. The Medicaid income ceiling is highest for pregnant women, and is more generous for younger children than for older ones. Eligibility standards are more stringent for adults than for children, and single adults and childless couples face the tightest requirements (Table 1). New York s Child Health Plus subsidizes coverage for children living in families with income up to 185 percent of the federal poverty level.* Next year, Child Health Plus will subsidize children in families with income up to 192 percent of the poverty level, and in the year 2000 will subsidize those in families with income up to 208 percent. In addition, families above these income levels may participate by paying the full premium. Given these program rules, it is not surprising that the percent of New Yorkers without health insurance varies not only by income but also by family structure. Nearly one-third of all nonelderly single adults in the state were uninsured during 1996 compared to only 13 percent of adults in two-parent families. Despite policies that favor children, New York s children are not universally covered; more than 770,000 (15 percent) lack health insurance. Among children living in families with incomes below the federal poverty level, nearly one in five under 6 years of age and more than one in five between the ages of 6 and 11 were uninsured. The proportion rises to one in four among children aged 12 through 18.** These estimates are particularly striking since children living at or near the poverty level are eligible for Medicaid; perhaps as many as 285,000 low-income children are eligible but not enrolled. Most uninsured children (415,000) had at least one parent in the paid labor force working full-time for the full year (Figure 11). More than three-quarters of uninsured children living in families with incomes below the federal poverty level had at least one parent who was employed. And more than 275,000 uninsured children lived in households where at least one parent worked full-time, fullyear but had income below 200 percent of the federal poverty level. Not employed 11% Not employed 24% Full-time part-year workers 21% Part-time part-year workers 6% Full-time part-year workers 16% Part-time full-year workers 4% Part-time part-year workers 9% ALL UNINSURED CHILDREN UNINSURED CHILDREN IN FAMILIES WITH INCOME BELOW THE FEDERAL POVERTY LEVEL FIGURE 11. Parental Labor Force Attachment of All Uninsured Children and All Poor Uninsured Children, New York State, 1996 Source: March 1997 Current Population Survey * The state of New York uses gross income to determine eligibility for Child Health Plus and net income to determine eligibility for Medicaid. In order to be consistent, all references in this report are based on net income. Gross income equals approximately 120 percent of net income. Therefore, gross income eligibility of 222 percent of poverty translates to net income eligibility of 185 percent of poverty. ** As 1996 estimates, these numbers do not reflect increased access to insurance for children subsequently funded through the expanded Child Health Plus program. See discussion in Chapter 2. 5

14 15.0% 85.0% 46.0% 54.0% CITIZENSHIP STATUS Another important correlate of health insurance coverage is citizenship status (Figure 12). Statewide, 46 percent of non-u.s. citizens were uninsured during 1996, while 15 percent of U.S. citizens in the state were uninsured. Of the 3.1 million uninsured New Yorkers, nearly one-third were not U.S. citizens. Again, income plays an important role: more than 57 percent of non-citizens with incomes below 200 percent of the federal poverty level were uninsured. US citizens Insured Uninsured FIGURE 12. Insurance Status of Nonelderly Population by Citizenship Status, New York State, 1996 Source: March 1997 Current Population Survey 27.8% 72.2% 13.0% 87.0% 19.1% 80.9% NYC Rest of NYS Total NYS Insured Uninsured Non-citizens FIGURE 13. Insurance Status of Nonelderly Residents, New York City and Rest of New York State, 1996 Source: March 1997 Current Population Survey NEW YORK CITY RESIDENTS Finally, a disproportionate share of the uninsured reside in New York City. New York City accounts for 41 percent of the state s population and 60 percent of its uninsured residents. Nearly 28 percent of all nonelderly New York City residents more than one in four lacked health insurance during This contrasts with an estimated 13 percent of nonelderly New Yorkers in the rest of the state who were uninsured (Figure 13). CONCLUSION The proportion of uninsured individuals in New York State is high and rising faster than in the nation as a whole. While the proportion of New Yorkers without health insurance was lower than the national average during the early 1990s, New York now has a higher proportion of residents without insurance. Though private insurance coverage has decreased slightly at the national level, the share of New Yorkers with private insurance has decreased sharply. This pronounced decline, particularly among workers employed in smaller firms, has driven the rise in the percent uninsured. Most of the uninsured live in low- and middle-income families, with incomes below 200 percent of the federal poverty level. Most adults in these families are working, many of them full-time throughout the year. Finally, a large number of children do not report a source of coverage yet appear eligible for the Medicaid program. 6

15 II. New York State s Evolving Health Care Policy and Market Environment Compared to uninsured residents of other states, uninsured New Yorkers have historically had many options for receiving health care services. New York State and New York City have a long-standing commitment to supporting the health care safety net. New York City has the nation s largest public hospital system, the New York City Health and Hospitals Corporation, which has an annual budget of $2.8 billion. * In addition to providing support for public hospitals, New York State has promoted the financial viability of hospitals that serve the uninsured through its bad debt and charity care pools. It also provides ongoing funding for graduate medical education, which in turn supports medical residents, who make a substantial contribution toward caring for the state s uninsured population. More recently, New York City and New York State have provided financial assistance to expand primary care capacity in underserved areas through innovative financing mechanisms such as the Primary Care Development Corporation. The alarming increase in the number of uninsured persons and particularly low-income uninsured persons in New York comes at a volatile time in the state s health care environment. The combined effects of federal and state legislative actions, along with the dynamics of the health care market, suggest that the growing numbers of uninsured New Yorkers may face increasing difficulty gaining access to services. The policy and market changes described in this chapter surface two themes that are cause for concern: Providers abilities to use revenue from other sources to cover unreimbursed costs for patients without coverage may be substantially limited by cuts, or reduced growth, in payments to providers because of public and private managed care; federal legislative changes in public program provider payments; and the end of state rate-setting. Publicly funded coverage may decline as welfare reform reduces the rolls of public assistance beneficiaries who automatically receive Medicaid and as welfare diversion strategies discourage families potentially eligible for Medicaid from seeking assistance. At the same time, other policy initiatives have been geared toward incrementally expanding insurance coverage and easing the financial strain on providers during this period of transition. Federal legislation funded a substantial increase in children s coverage, and state legislation expanded children s coverage as well as some small programs for adults. Both state legislation and administrative actions have provided for grant programs geared toward assisting providers to make needed changes while coping with revenue constraints. * In Challenges Facing New York City s Public Hospital System (August 1998), the New York State Comptroller reports that According to HHC, 32 percent of those receiving oupatient care and 9 percent of inpatients were uninsured in FY

16 This section provides an overview of these recent market and policy changes and explores their impact on insurance coverage and access to health care for New York residents. While a more competitive hospital industry may ultimately help to moderate growth in the cost of care, health care facilities may be less able to cross-subsidize care for uninsured patients. THE CURRENT HEALTH CARE POLICY AND MARKET ENVIRONMENT New York State s health care system has experienced substantial change over the past several years. Although New York is generally characterized as being slow to embrace managed care, at the beginning of 1997 nearly 34 percent of New Yorkers with private insurance were enrolled in health maintenance organizations (HMOs), and approximately 25 percent of New Yorkers enrolled in Medicaid were enrolled in managed care plans as of March Patterns of resource use are also changing; hospital length of stay declined from 9.0 days to 7.6 days between 1992 and 1996, while hospitals reported 26 percent growth in ambulatory care visits. Hospitals are engaging in unprecedented levels of merger and affiliation activity, and facilities are aggressively searching for strategies to reduce expenditures without reducing quality. Insurance premium growth slowed dramatically in the early 1990s, and a recent national survey of employers indicated aggregate growth in health benefit costs for large firms in the northeast of less than 2 percent between 1993 and 1997 (Mercer/Foster Higgins, 1997). However, a variety of forces may begin to push premiums up after this hiatus. Insurers that experienced financial losses in 1997 are likely to respond with premium increases that may in turn affect affordability and coverage levels. In addition, there has been increased pressure for state and federal regulation of managed care and an increasing backlash against restrictions in consumer choice; any lifting of these restrictions, HMOs argue, may limit their ability to control costs. During this period, there have been a number of important public policy changes, including: the New York Health Care Reform Act (HCRA) of 1996 the New York Partnership Plan federal welfare reform legislation and the Balanced Budget Act of 1997 New York s small group and individual insurance market reforms The impact of each of these changes is described in more detail below. HEALTH CARE REFORM ACT OF 1996 With the Health Care Reform Act (HCRA) of 1996, New York State policymakers embraced the concept of a more competitive and integrated health care market. Prior to HCRA, New York State maintained regulatory control over the health care system through the New York Prospective Hospital Reimbursement Methodology (NYPHRM), which set inpatient hospital payment rates for all payers except Medicare and HMOs. * However, the growing penetration of managed care with its negotiated rates meant that NYPHRM was governing a decreasing share of business. This, coupled with the shift from inpatient to outpatient delivery settings, led to the passage of HCRA and the subsequent sunset of NYPHRM on December 31, A major goal of HCRA is to foster a more competitive health care system while still protecting the public s access to high-quality health care. Under HCRA, hospital rates are set through payer-provider negotiations rather than by state regulators. * Earlier versions of NYPHRM had included rate setting for Medicare and HMOs. 8

17 TABLE 2. Key Provisions in HCRA Legislation 1998 HCRA FUNDING HCRA MECHANISM PURPOSE AMOUNT ELIMINATION OF HOSPITAL RATE SETTING Negotiated Inpatient Hospital Prices Improves health system efficiency and competition N/A by allowing hospitals and insurance plans to to negotiate rates, rather than having them determined by the state. GRADUATE MEDICAL EDUCATION Professional Education Pool Creates regional GME pools to distribute monthly $1.4 billion payments to teaching hospitals based on their share of the region s total adjusted GME spending generated by a covered lives assessment from private payers ($544 million) and Medicaid payments ($856 million) UNCOMPENSATED CARE Indigent Care Pool Offsets the cost of hospital inpatient and $786 million outpatient and diagnostic and treatment centers bad debt and charity care by providing additional funds for indigent care. HEALTH CARE INITIATIVES POOL INSURANCE PROGRAMS Child Health Plus Program Expands state children s health insurance program $150 million to age 18 and adds inpatient care to benefits package. Voucher Insurance Program & Provides state aid to help individuals and $11 million Individual Health Insurance families purchase commercial health insurance. Subsidy Program Programs only available in select areas of state. Small Business Insurance Partnership Provides grants to assist eligible employers in $6 million purchasing small group health insurance policies for full-time employees and dependents. Catastrophic Insurance Continues to fund existing catastrophic $7 million Coverage Program insurance program. MEDICAID MANAGED CARE TRANSITION-RELATED PROGRAMS Health Care Workforce Retraining Provides grants to establish employee training $50 million * in regions with job losses resulting from health system change. Health Facility Restructuring Offers loans and technical assistance to hospitals $20 million** developing strategies to improve service delivery through the formation of networks and affiliations intended to increase long-term stability. Adaptation to More Competitive Provides grants to assist providers in developing $30 million Health System more efficient networks, information systems, and care delivery strategies PUBLIC HEALTH FUNDING Primary Health Care Services Grants to develop primary care capacity through $28 million physician loan repayment program, primary care practitioner scholarships and medical education assistance for minorities. Emergency Medical Service Programs Grants to improve delivery of emergency medical $16 million services. HIV/AIDS Programs Grants to provide special HIV services for infants $17 million and pregnant women and to expand AIDS drug assistance program. Cancer and Children s Care Initiative Grants to provide transition support to children s $10 million and cancer hospitals and to provide for increased cancer screening and education. Rural Health Care Development Funding to expand and improve health care delivery $17 million and managed care capacity in designated rural communities. QUALITY IMPROVEMENT Task Force on Health Care Quality Charged with distributing state grants to fund $8 million Improvement & Information Systems local efforts aimed at improving health care quality and performance outcomes. Source: Healthcare Association of New York State, * Funding is linked to implementation of Medicaid managed care. Funding for 1997 was set at $50 million and increases up to $100 million when more than 95% of eligible Medicaid recipients are enrolled in managed care plans. ** An additional $10 million is available at the discretion of the Commissioner. Traditional fee-for-service Medicaid and Medicare rates continue to be set by government agencies, but these payments will decline as a proportion of total revenues as Medicaid and Medicare recipients are enrolled in managed care plans. HCRA has various implications for the uninsured. By promoting competition in the hospital industry, HCRA seeks to reduce the growth in overall health care expenditures. While a more competitive hospital industry may ultimately help to moderate growth in the cost of care, health care facilities may be less able to cross-subsidize care for uninsured patients. HCRA contains a number of measures intended to expand coverage and safeguard access to health care for the uninsured, including: establishment of targeted funding pools for indigent care and graduate medical education new subsidies for individual and employer purchase of health insurance expanded insurance coverage through the development and expansion of state-supported insurance programs, such as Child Health Plus grant funding to 1) support health care facilities seeking to restructure their organizations, 2) retrain health care workers displaced by changes in the health care field, 3) assist health care providers in the transition to a competitive system, and 4) ensure that appropriate capacity and services are available from rural hospitals Key HCRA provisions, along with state fiscal year 1998 funding allocations, are displayed in Table 2. HCRA is scheduled to expire on December 31, The New York State legislature has charged the Department of Health with evaluating HCRA s impact on quality, access, and competition; this evaluation will inform the reauthorization debates expected to come in the 1999 legislative session. 9

18 2,000,000 1,500,000 1,000, , , , , , , ,588 June 97 Dec 98 Dec 99 Dec 00 New York City Rest of State FIGURE 14. Projected Enrollment in Medicaid Managed Care, New York City and Rest of State, Source: New York State Department of Health NEW YORK PARTNERSHIP PLAN (FEDERAL SECTION 1115 MEDICAID WAIVER) New York s Section 1115 waiver request to implement the New York Partnership Plan, a comprehensive Medicaid managed care program, was approved by the federal Health Care Financing Administration for a five-year period, beginning July 15, The Partnership Plan allows the mandatory enrollment of 2 million eligible Medicaid recipients into managed care plans over a three-year phase-in period (Figure 14). The waiver also allows for the creation of Special Needs Plans to serve persons with serious and persistent mental illness and persons with HIV/AIDS. In addition, the Section 1115 waiver allows New York to integrate its Home Relief program, which was previously funded only by the state and localities, into Medicaid, enabling New York to receive additional matching funds from the federal government. Altogether, approximately 25 percent of the New 1,917,589 Yorkers under 65 years of age enrolled in Medicaid were enrolled in managed care plans in March ,274,188 The primary goals of the Partnership Plan are to improve the quality and comprehensiveness of health care within the Medicaid program; increase the emphasis on primary and preventive care; remove payment incentives biased toward 643,401 institutionally based delivery systems; develop managed care systems for high-cost, high-need Medicaid populations; and contain New York s Medicaid costs through the use of more cost-effective managed care systems. State policymakers estimate that managed care enrollment will reduce overall Medicaid spending in the state by approximately 5 percent. * Although the Partnership Plan seeks to improve access for Medicaid recipients through managed care systems, its impact on the uninsured may be less beneficial, particularly when coupled with changes stimulated by HCRA. Reductions in Medicaid spending growth will further reduce the money available for providers to subsidize uncompensated care for the uninsured. Hospitals that have traditionally served large numbers of Medicaid patients may see their revenues drop as other facilities respond to declining utilization by competing for Medicaid patients; meanwhile, hospitals and health centers will have to negotiate rates for Medicaid managed care patients, placing additional pressure on cross-subsidies. Hospitals that have traditionally served low-income patients may lose a portion of their paying customer base if they are not considered managed care ready and managed care friendly by Medicaid managed care plans. Safety net and public hospitals and clinics may have less capital to invest in the systems needed to be effective in managed care contracting, and they may have difficulty establishing partnerships with private organizations because of concerns about bureaucracy and red tape. Medicaid managed care creates an imperative for providers historically unaccustomed to market mechanisms to engage in rapid change. In anticipation of these financial and operational pressures, the Partnership Plan includes $1.25 billion in federal matching funds over five years to assist voluntary and public hospitals that serve large numbers of Medicaid and uninsured patients 1,467,738 1,061, ,821 * Because many high-cost beneficiaries will remain outside the mandate for some time, this savings target was initially translated into substantial reductions in premium payments to managed care plans. Rate increases were subsequently enacted in response to managed care plans claims that they could not survive if they continued to sustain such serious financial losses. While state officials contend that subsequent increases are adequate, managed care plans continue to argue that further increases are needed. 10

19 Although the Partnership Plan seeks to improve access for Medicaid recipients through managed care systems, its impact on the uninsured may be less beneficial. with the transition to Medicaid managed care. Funds from the Community Health Care Conversion Demonstration Program will be available to hospitals where Medicaid patients constitute at least 20 percent of total discharges. Funds can be used to enhance the institution s primary care capacity, increase managed care readiness, restructure service delivery, and retrain hospital workers to function more effectively in a managed care environment. CHILD HEALTH PLUS New York s Child Health Plus initiative is the largest non-medicaid, publicly funded child health insurance program in the country. The program was established in 1990 and began providing health insurance coverage to children in August The goal of Child Health Plus is to establish a medical home for participating children in order to improve their access to primary and preventive health care services. Initially Child Health Plus provided only primary and preventive outpatient care and served only children under age 13. In 1996, HCRA allocated an additional $466 million over three years ( ) to Child Health Plus, expanding the benefit package to include inpatient care and other services and extending Child Health Plus eligibility through age 18. This expansion promised to increase access for a large number of children; however, as with Medicaid, many eligible individuals have not enrolled in the program. An important aspect of the impact of Child Health Plus will be the effectiveness of the state s enrollment and outreach efforts. The federal Balanced Budget Act of 1997 provided an opportunity for New York to further expand Child Health Plus with enactment of the Title XXI State Children s Health Insurance Program (SCHIP). Title XXI provides $24 billion over the next five years to enable states to expand health insurance to low-income children through Medicaid expansions or separate state insurance programs. In July 1998 New York enacted a new state law to implement the Balanced Budget Act s provisions. As a result, New York will be raising the Child Health Plus income ceiling from 185 percent of the federal poverty level to 192 percent in January 1999 and to 208 percent in July * The Child Health Plus benefit package will expand as well to cover benefits such as dental, speech and hearing, vision, and mental health services. In addition to these Child Health Plus provisions, the July 1998 legislation also enacted several changes to the Medicaid program authorized by the Balanced Budget Act. These changes could facilitate and maintain enrollment of lowincome children in health insurance programs. Beginning January 1, 1999, all children enrolled in Medicaid will be guaranteed 12 months of continuous coverage regardless of changes in family income. And when Medicaid eligibility expands up to 133 percent of the federal poverty level (a provision contingent on other factors), New York will offer presumptive Medicaid eligibility to lowincome children. Presumptive eligibility permits providers and other qualified entities to enroll children in Medicaid without immediate verification of income. These children are entitled to receive all health services covered under Medicaid while awaiting final eligibility determinations. * As indicated in Chapter 1, the State of New York uses gross income to determine eligibility for Child Health Plus and net income to determine eligibility for Medicaid. In order to be consistent, all references in this report are based on net income. 11