By Christopher Guadagnino, Ph.D.

Karen Rizzo, M.D.

Published December 2007

• React to this article in the Discussion Forum.

Proposals to expand affordable health insurance coverage to more uninsured individuals – or universally to all – have become staples in state and federal legislatures. The problem has grown more serious and familiar each year, as health care cost inflation continues to drive up insurance premiums, employers continue to shift more costs onto employees, and a greater number of smaller employers drop coverage altogether – making working individuals the fastest growing segment of the uninsured.

The trend has serious health implications for uninsured persons, as well as economic impacts on the health care provider community. Uninsured individuals delay seeking care, show up at later stages of an illness when they do seek care, or forgo care altogether. As the number of uninsured grows, the strain on the health care safety net intensifies. Inherent weaknesses of that safety net – maintaining adequate resources and coordinating patients’ specialty care needs – may be reaching a critical point.

The safety net infrastructure is focused on primary care, with venues such as volunteer clinics and community health centers, some of which receive funding as Federally Qualified Health Centers, and others that receive subsidies from Medicaid. While those venues provide access to what many regard as excellent primary care services to vulnerable populations, including the uninsured, they are not designed to offer most specialty care services, and they "do the best that they can" to connect patients with offsite secondary and tertiary care services. Those efforts are becoming increasingly difficult. The pool of specialists who are available and willing to render charity care is shrinking as physicians struggle with intensifying pressures of reimbursement and overhead costs in their practices. Many physicians are also moving to larger group or employed practice settings – which researchers say provide less charity care.

The ability of hospitals to absorb the cost of charity care – including provision of tertiary services to the uninsured – is partly a function of their financial health and their charity care subsidies. But those subsidies go to the hospitals, not to physicians who perform the procedures, and many hospitals are now having to pay stipends to retain an adequate network of on-call physicians – a situation that analysts warn does not address the problem of the rising number of uninsured people, and is likely to create additional quality and cost pressures for the health care system.

Affordability of health insurance is eroding in the wake of an economic downturn and rising health care costs, which have increased both the number of uninsured and the proportion of working individuals among the uninsured population. Health insurance premiums for family coverage have increased 78 percent since 2001, while wages have gone up only 19 percent, according to a report released in October by the Kaiser Commission on Medicaid and the Uninsured.

Overall, about 8.6 million more Americans were uninsured in 2006 (47 million total) than in 2000, and the rate of those without insurance has grown 2.1 percentage points during this period, from 13.7 percent in 2000 to 15.8 percent in 2006, according to an analysis released last month by the Economic Policy Institute (EPI). There were almost five million more uninsured workers in 2006 than in 2000 – disproportionately young, non-white, less educated and low wage. Almost 80 percent of the uninsured were U.S. citizens.

Declines in employer-provided health insurance were the leading force behind declines in overall health insurance from 2000 to 2006, and workers and their families have been falling into the ranks of the uninsured at alarming rates – nearly two out of every five Americans are not covered by their employer, according to EPI. No category of workers was insulated from loss of coverage, and even full-time workers, workers with a college degree, and workers in the highest wage quintile experienced declines in coverage between 2000 and 2006, EPI noted.

The level and extent of employer-provided coverage loss varied by state, however. Pennsylvania suffered the second-largest decline in employer-provided coverage in the nation between the 2000-01 and 2005-06 periods – 491,392 – while New Jersey exhibited almost no decline in employer-provided coverage between those periods – 283 – according to EPI.

Differences in health insurance regulations between the two states may explain some of that difference. Seventy-one percent of the uninsured in Pa. are employed, and about one-quarter of the uninsured have been so for five years, while the largest group of uninsured are individuals between 18 and 24 years old, according to Ann Torregrossa, Esq., senior policy manager of the Governor’s Office of Health Care Reform, citing 2004 data – the most recent available – from a study by the Pennsylvania Department of Insurance. The biggest erosion of employer-based coverage is among small employers, she says, because Pa. is one of only two states that does not limit the rating factors that insurance companies can use to price health plans – allowing them to use demographic rating, which Torregrossa says is "less like insurance" because it raises premium prices for workers who are older or have higher risk factors, instead of using community rating, which spreads the cost of risk more widely among an insured population.

Overall uninsurance rates also vary by state, according to Census data averages from 2004 to 2006: about 17 percent of the national nonelderly population is uninsured, while New Jersey’s percent is on par with the national figure, and Pennsylvania’s is lower, at 11.8 percent.

Income levels of the uninsured vary, as well. While most nonelderly uninsured individuals in 2006 (almost all the elderly are covered through Medicare) came from families regarded as near-poor – below 200 percent of the federal poverty level (FPL) of $20,614 for a family of four – one-third did not. About 24 percent of the nonelderly uninsured were in families earning an annual income between 200 and 400 percent FPL, while 11 percent were 400 percent FPL and above, according to the Kaiser Commission report.

Even as the risk of becoming uninsured becomes more of a middle class problem, those who are most at risk of lacking any health insurance coverage are still the most vulnerable groups, according to data released this August by the Medical Expenditure Panel Survey (MEPS) of the Agency for Healthcare Research and Quality:

· Fully 17.4 million people – 6.8 percent of the entire U.S. nonelderly population – were uninsured for the entire four-year period from 2002 through 2005.

· Individuals reporting excellent or very good health status were the least likely to be uninsured for at least one month during 2004 to 2005, while those reporting fair/poor health were the most likely to be uninsured for the entire 2002-2005 four-year period.

· Hispanics were disproportionately represented among the long-term uninsured. While they represented 16 percent of the population under age 65, they represented 40 percent of the long-term uninsured for the period 2002-2005.

· Individuals who were poor (100 percent FPL or lower) were disproportionately represented among the long-term uninsured. While they represented 13 percent of the population under age 65, they represented 26 percent of those uninsured for the entire 2002-2005 four-year period.

While several venues of health care are available to the uninsured – including free clinics, community health centers, hospital-based charity care, and private physician practices – the uninsured are far more likely than those with health insurance to postpone or forgo health care, and their health status reflects these dynamics.

Many uninsured people do not know of an affordable source of care to turn to when they need medical attention, and are at elevated risk of going without needed medical care, according to a study released in 2004 by the Center for Studying Health System Change (HSC), which found that less than half of uninsured Americans either typically use, or are aware of a safety net provider in their community. Among all uninsured people, those with lower-incomes, racial/ethnic minorities and people living closer to safety net providers are more likely to know of, or use a safety net provider for medical care. Uninsured people identify physician offices and community health centers most frequently as sources of lower-cost medical care, while hospital-based facilities – outpatient and emergency departments – are less likely to be mentioned, and few identify EDs as places to get affordable medical care, HSC noted.

Contrary to conventional assumptions, uninsured people do not flock to hospital emergency rooms to receive non-emergent care, and instead, delay or forgo needed care. According to an analysis released in October by the Kaiser Family Foundation, the uninsured are not more likely to frequently visit emergency departments than those who are insured, and high emergency department users are far more likely to have Medicare or Medicaid coverage – probably because of the poor health and age of these populations.

Cost remains a significant barrier to access between uninsured persons and needed health care. According to The Department of Health and Human Services’ National Health Interview Survey data, one-quarter of uninsured nonelderly adults in 2006 said they postponed seeking care due to cost (compared to six percent of private insureds who said so), one-quarter said they needed care but did not get it due to cost (compared to three percent of private insureds), and one-quarter reported they could not afford prescription drugs (compared to four percent of private insureds). The uninsured are less likely to receive preventive care than those with insurance and are more likely to be hospitalized for conditions that could have been avoided – findings which suggest that charitable care and the safety net of community clinics do not satisfactorily substitute for health insurance.

Adverse health effects of being uninsured are well-documented. A series of reports by the Institute of Medicine from 2002-2003 found that the uninsured more often:

· Go without cancer screening tests, delaying diagnosis and leading to premature death.

· Do not receive care recommended for chronic diseases, like timely eye and foot exams to prevent blindness and amputations in persons with diabetes.

· Lack regular access to medications to manage conditions such as hypertension or HIV infection.

· Receive fewer diagnostic and treatment services after a traumatic injury or a heart attack, resulting in an increased risk of death even when in the hospital.

While the uninsured continue to confront barriers of awareness and cost when they need health care services, there is a growing hole in the safety net itself: a decline in the availability of health care providers who offer charity care.

As the number of uninsured rises, community safety net providers treat more uninsured patients without proportionate funding increases, and are stretching limited resources. Hospitals with shaky margins, or those in the red already, are particularly vulnerable. Some observers contend that this combination of provider burdens may eventually result in the collapse of the safety net system.

Since 2000, Philadelphia’s number of uninsured residents has risen to 160,000, from 90,000, without the addition of any new city health centers, which provide care at no charge, and – with over 300,000 visits per year – are stretched beyond their original capacity, according to Walter Tsou, M.D., MPH, former Philadelphia Health Commissioner, and past president of the American Public Health Association.

A pivotal venue of charity care is shrinking: physician offices. Continuing a decade-long trend, the proportion of U.S. physicians providing charity care dropped to 68 percent in 2004-05 from 76 percent in 1996-97, with declines in charity care observed across most major specialties, practice types, practice income levels and geographic regions, according to a national study by the HSC. The overall number of charity care hours per 100 uninsured people declined 18 percent – from 7.7 hours in 1996-97 to 6.3 in 2004-05, with much of the decline occurring since 2000-01, primarily because of large increases in the number of uninsured, according to Peter J. Cunningham, Ph.D., an HSC senior fellow and a co-author of the study. Financial and time pressures are partly to blame, as declining practice incomes and an increasingly crowded patient schedule may lead physicians to believe they can no longer afford or have time to provide charity care, Cunningham notes.

Charity care is also eroding because physicians are increasingly moving to practice settings where there is less provision of it. Levels of charity care are highest among physicians in solo or small group practices and those who are full or part owners of their own practice, while physicians in larger groups and institutional-based practices are much less likely to provide charity care, which declined sharply between 1996-97 and 2004-05 among these physicians, according to Cunningham. During that time interval, the percentage of physicians in solo or two-physician practices declined from 40 percent to 31 percent, while the percentage in large groups, hospitals, and medical schools increased from 21 percent to 26 percent. Larger practices may present greater organizational barriers to uninsured patients, while employed physicians have less discretion over the types of patients they see, Cunningham notes.

Since nearly one-third of all uninsured individuals seek care in private physicians’ offices, according to Cunningham’s survey research, the erosion of charity care in physician practices has significant impacts on the uninsured, who have been required to rely even more on formal safety net providers such as community health centers and free clinics. Although overall federal spending on the safety net is increasing, Cunningham cautions that it has not kept pace with the growing number of uninsured, and it is likely that safety net resources will become even more constrained as a result of increased demand.

Hospitals emergency departments are also feeling the hit. While persons with health insurance still account for the vast majority of hospital emergency room visits in the U.S., the proportion of visits by uninsured people is rising at a relatively higher rate – in part because they are finding it harder to get into private physician offices, according to a study released last month by the HSC. The uninsured, or self-pay patients, accounted for 14 percent of ED visits in 2003, rising to 16 percent in 2005, the study noted.

The impact on Pa. hospitals of the charity care burden is a contentious issue. According to Torregrossa, Pa. hospitals are providing less charity care than expected: one-half of the amount of the national average, according to a comparison of data from the Pennsylvania Cost Containment Council (PHC4) and the General Accounting Office. "Community clinics are providing a tremendous amount of care to the uninsured, and have huge waiting lists, especially in rural and medically underserved areas," she says.

The hospital community disagrees with that assessment. In FY 2006, Pa. hospitals provided $597 million in uncompensated care – the portion of total hospital care that must be written off as bad debt or charity care – and the burden is greatest on smaller, rural community hospitals with thinner margins or larger bottom-line losses, says Paula Bussard, senior vice president for policy and regulatory services of the Hospital & Healthsystem Association of Pennsylvania (HAP). Roughly half of Pa. hospitals with emergency departments, she notes, have established an on-site or adjacent primary care facility to handle non-emergent care, staffed by family practitioners, residents, or nurse practitioners.

More than one-third of all Pa. hospitals are presently in significant financial distress, and two-thirds are performing at levels considered below long-term economic viability, and their shifting of the cost of uncompensated care to private insurers is partly responsible for employees losing health insurance coverage from their employers, according to Critical Condition: The State of Health Care in Pennsylvania, a report released in October by the PHC4.

The Pa. Legislature has passed funding for start-ups of new community centers across the state, says Torregrossa, but the number of safety net health care providers per 100,000 Pennsylvanians remains a concern – ranging from about two to nine across various regions of the state – while the administration is grappling with those ratios to determine what constitutes an adequate supply, and to target funding for new centers appropriately.

As demand for charity care grows, the provider community is driving efforts at the local level specifically to boost access by the uninsured population.

A coordinated effort among physicians, physician assistants, pharmacies, hospitals, community foundations and service groups called Project Access Lancaster County (PALCO) is targeting low-income residents (family incomes at or below 200 percent FPL) in the county who are without health insurance, with the goals of preventing treatable conditions from becoming serious or life-threatening, and reducing the use of emergency rooms to treat non-emergent illnesses, according to Karen Rizzo, M.D., president-elect of the Lancaster County Medical Society, which encouraged physicians to participate in the program and whose facilities serve as PALCO’s organizational headquarters.

"Without this program, uninsured patients coming into private physicians’ offices would be referred to a hospital-run clinic or the ER," says Rizzo. "There was an increasing number of people using the ER because they didn’t have a primary care physician or a medical home. PALCO is an effort to address that problem," she adds.

The program started six months ago and provides a wide spectrum of physician and hospital services at low or no cost, including primary and specialty physician care, hospitalization, surgeries, outpatient care, lab work, X-rays studies, rehabilitation medicine and formulary medications, says Rizzo. Services are donated by the caregivers and physician involvement is strong – close to 550 of Lancaster Co.’s 850 physicians have joined the project – while all four of the county’s hospitals are also on board, she notes. Physicians are required to see at least two PALCO patients per month, and case workers shunt patients to the appropriate caregivers, Rizzo adds.

The program is not open-ended, and is considered a "health care bridge," for which patient eligibility is checked at six month intervals, and ends if a patient gains access to health insurance. "We are doing our part to stabilize their health concerns while they stabilize their lives," notes Rizzo.

Community Volunteers in Medicine, a non-profit community-based volunteer organization in West Chester, is in its tenth year of providing a medical home for uninsured working poor residents of Chester County whose income is at or below 200 FPL, and who are not eligible for government-funded insurance, according to Helen Heidelbaugh, R.N., M.S., its president and CEO. "Their pay stub is their insurance card here," she says.

The center is entirely supported by philanthropy, receives no insurance reimbursement and is not a part of any government-funded program, while services are provided by health care professionals and others who volunteer their time and are supported through gifts made by individuals, foundations, corporations, churches and civic groups, she adds.

The center has 33 volunteer primary care physicians, and a network of 120 specialty physicians who take referrals and provide care in their offices at a reduced fee, with the center subsidizing the patients’ cost according to their ability to pay, says Heidelbaugh.

The center serves as a statewide and national model that has already been replicated in Bucks and Centre counties, and is one of 50 Volunteers in Medicine facilities now operating in 17 states, she says.

"According to a survey we did four years ago, our center has reduced ER visits in Chester Co. by 30 percent. We know we’re keeping people managed and out of the ER and ICU," including those with diabetes, asthma and heart conditions, says Heidelbaugh. "We’re worth $12 million to this community – in health care costs for these folks if we were not here," she says. "We’re protecting the public health infrastructure by catching TB, MRSA, flu and other communicable diseases. Many of our patients are workers in the food service and hospitality industry," Heidelbaugh adds.

Even an adequate supply of community health centers and volunteer primary care physicians doesn’t address what analysts agree is the most significant and consistent gap in the charity care safety net: access to specialty care. While community health centers offer comprehensive primary care services, most specialty consults are not within the range of their resources and have to be referred out, resulting in a tremendous drop-off in access for uninsured patients, particularly those with chronic illnesses requiring active maintenance and ongoing consultation with specialists such as cardiologists, according to Joel Cantor Sc.D., director of the Center for State Health Policy at Rutgers University.

Philadelphia’s City District Health Centers are an exception, as the city pays for the referral services, including surgeries, and they have specific hospitals to which they are assigned for referrals, notes Stephen Permut, M.D., chair of Family and Community Medicine at Temple University School of Medicine.

Lack of access to specialty services is a more important problem for community health centers than previously thought, according to a study published in the September/October issue of Health Affairs, which surveyed medical directors of all federally qualified community health centers in the U.S. in 2004. Medical directors reported that about 25 percent of visits to their centers – irrespective of insurance status – resulted in medically necessary referrals for services not provided by the center. While Medicare and privately insured patients rarely had difficulty obtaining access to specialty medical services, significantly higher proportions of uninsured patients were rarely or never able to obtain access to high-tech services (over 50 percent), specialized services (30 percent), medical specialists (over 20 percent), diagnostic tests (over 20 percent), or admission to a hospital (over 30 percent). The most frequent barriers to specialty care access among the uninsured were unwillingness of providers outside of the centers to take uninsured patients, and patients’ inability to meet the requirement to pay up-front for services. The study’s authors concluded that these problems may increase if additional resources and planning are not devoted to assuring access to outside specialty services or bringing a greater array of services into the community health centers.

It is particularly challenging to find specialists who are willing to perform high-cost diagnostic procedures, such as arteriograms and thallium stress tests, on uninsured patients referred from Federally Qualified Health Centers in NJ, says New Jersey Health Commissioner Fred Jacobs, M.D., J.D.

A community health center gives an uninsured patient the names of specialists, and it may take weeks or months to get an appointment, or they may not even make the call, says Scott R. Schaffer, M.D., president of the Camden County Medical Society and past medical staff president of Cooper University Hospital. Most specialists see uninsured patients who are admitted to a hospital, and emergent tertiary care is more likely to be provided to an uninsured individual than initial elective specialty care in a physician’s office, Schaffer believes.

Funding and coordinating specialty care for the uninsured are only two obstacles. Hospitals are finding it increasingly difficult obtaining emergency on-call coverage from specialist physicians, according to the October HSC study. Factors influencing physician reluctance to provide on-call coverage include decreased dependence on hospital admitting privileges to maintain a viable practice as more services shift to non-hospital settings, inadequate payment for emergency care – especially for uninsured patients, and medical liability concerns. Hospitals have had to adopt strategies to secure on-call coverage, including enforcing hospital medical staff bylaws that require physicians to take call, paying daily or monthly stipends for on-call coverage, paying physicians’ professional fees for patients who are unable to pay, and employing specialists.

Membership on a hospital’s medical staff used to require providing some level of charity care, but the culture has changed, making those bylaws less universal and enforceable, as hospitals find it increasingly difficult to revoke privileges of a physician who is bringing in a sizeable number of patient referrals, says Jacobs.

As many specialists are now over 50 years old, they have become "absolved" of a typical medical staff bylaw’s expectation of 15 to 20 years of charity care commitment, while such a commitment is typically absent at non-hospital venues such as freestanding surgi-centers, says Richard J. Scott, M.D., president of the Medical Society of New Jersey, and an orthopedic surgeon.

"The traditional role of physicians taking emergency call as part of their obligation for hospital admitting privileges is unraveling across the country, posing risks that insured and uninsured patients, alike, may not get timely and appropriate care," according to HSC Senior Researcher Ann S. O’Malley, M.D. Specialties that are particularly difficult to secure for on-call coverage include orthopedic surgeons, neurosurgeons, plastic surgeons, trauma surgeons, hand surgeons, obstetrician-gynecologists, neurologists, ophthalmologists and dermatologists.

"Fifteen years ago, physicians provided unreimbursed charity care as a goodwill gesture to their community. That was back when their medical malpractice insurance bill was one-fifth of what it is now. The increased exposure to malpractice risk has become a disincentive to rendering charity care," says Scott.

One hospital in the HSC study reported paying specialists $10 million a year for on-call emergency coverage, while another guarantees physicians Medicare rates plus 20 percent for treating certain uninsured patients. Other hospitals are paying for physicians’ malpractice premiums in return for on-call coverage or are cross-subsidizing premiums as a way to keep on-call specialty services available. Because large academic medical centers with training programs often have many employed physicians, including residents and fellows who can provide emergency coverage, the ED coverage issue tends not to be as large a problem for these institutions as for community hospitals, according to the study. But an academic medical center might be the only source of specialty care for the uninsured in a community, resulting in waiting lists of several months to see a specialist, according to Cunningham, and raising issues of two-tiered medicine as less-experienced physicians such as residents are their only source of specialty care, according to Cantor.

The HSC study warned that hospitals’ varied strategies to alleviate the on-call coverage issue are not a panacea, and that failure to address key factors contributing to the problem – including the rising number of uninsured people – are likely to further aggravate the situation, creating additional quality and cost pressures for the health care system. The specialist on-call coverage issue also places a disproportionate burden on physicians who are willing to provide coverage, increasing the potential for adverse patient outcomes as the workload increases (specialists who provide on-call coverage in some areas must cover multiple hospitals on the same night) and morale declines, the study noted.

It is often the personal appeal of a primary care physician that prompts a specialist to see charity care patients – "a doctor who already sends you most of his patients. You just do it," says Scott.