Working poor unlikely to receive employment-related
insurance
The working poor in the United States are only one-third as
likely to receive health insurance from their employers and are
over five times as likely to be without insurance from any source
when compared with the nonpoor. It is ironic that the working
poor are playing by the "rules" and are productive members of the
economic system, yet they are without coverage for themselves and
their families, assert University of Florida researchers. In a
study supported in part by the Agency for Health Care Policy and
Research, Karen Seccombe, Ph.D., and Cheryl Amey analyzed a
sample of 7,734 employed, nonelderly adults from the National
Medical Expenditure Survey (NMES), which provides detailed
national estimates of health insurance coverage in the United
States.
The researchers classified as "poor" those who had household
incomes below the poverty line, which in 1987 was $11,519 for a
family of four (including two children); as "economically
vulnerable" persons with household incomes between $11,520 and
$23,040 (200 percent of the poverty level); and as "nonpoor"
those with household incomes over $23,040. Analysis showed that
nearly half (48.4 percent) of the working poor had no health
insurance from any source, compared with only 9.1 percent of
nonpoor persons. Persons who were employed less than full-time,
were not members of a union, did not work for multiple-site
employers, worked in firms with fewer than 100 employees, earned
less than $7.50 per hour, and had less than 1-year tenure on the
job, were more likely than other workers to lack
employer-sponsored insurance in their own names.
According to the researchers, future discussions of options for
financing health care should consider the importance of either
mandating employers to provide benefits to workers, as is the
case in Hawaii, or doing away with the employer-financing
mechanism altogether, which is the case in nearly every other
industrialized country in the world.
Details are in "Playing by the rules and losing: Health insurance
and the working poor," by Karen Seccombe and Cheryl Amey, which
appears in the Journal of Health and Social Behavior 36,
pp. 168-181, 1995.
Researchers provide new estimates of the underinsured
younger than 65 years of age
If they had been faced with catastrophic illness in 1987, at
least 29 million Americans with private health insurance would
have been underinsured, that is, their out-of-pocket expenses
would have exceeded 10 percent of family income. According to
this estimate, 9 million more persons were without adequate
protection against large medical bills than a decade previously,
says Pamela Farley Short, Ph.D., formerly of the Agency for
Health Care Policy and Research and currently with RAND
Corporation, and Jessica S. Banthin, Ph.D., of AHCPR's Center for
Health Expenditures and Insurance Studies.
They used insurance data from the 1987 National Medical
Expenditure Survey to determine which expenses would be covered
by individual insurance plans given a person's risk of
catastrophic illness. They estimated expenditures based on
observed average expenses for people in various risk groups who
were hospitalized, using a representative cross-section of the
U.S. population under age 65. Finally, the researchers projected
estimates from the 1987 survey to 1994, with adjustments for
population growth and changes in the demographic composition and
insurance status of the population. The projected estimates show
that the 29 million figure remains stable.
Projected estimates showed that the plans of 49.2 percent of the
insured would have failed to cap out-of-pocket expenses at $1,500
or less per person ($3,000 or less per family) had enrollees
incurred a catastrophic expense. Traditional policies with
standard cost-sharing limits did not provide adequate protection
for low-income families. Because cost-sharing required by a
typical policy was large in relation to income, 61.6 percent of
people with private insurance living below 125 percent of poverty
were at significant financial risk in 1994 had they experienced a
catastrophic illness.
The 1994 projections show that the privately insured who were
enrolled in nongroup plans or through small groups (with 25 or
fewer members) were more likely to be underinsured. Of people
with nongroup insurance plans, 40.7 percent were underinsured
when judged by a catastrophic illness; 23.9 percent were
underinsured when judged by actuarial values (the amount of total
covered expenses paid by the insurer). Approximately 24 percent
of people enrolled in very small groups were underinsured at
about twice the rate of those enrolled in very large groups.
Details are in "New estimates of the underinsured," by Drs. Short
and Banthin, in the October 25, 1995, Journal of the American
Medical Association 274, pp. 1302-1306.
Nonprofit hospitals respond to Medicare's PPS with higher
prices for private payers
Enactment by Medicare of the Prospective Payment System (PPS) in
1983—which pays hospitals a designated amount for patients
with a specific diagnosis regardless of hospital costs for the
patient—provided a strong incentive for hospitals to seek
ways to reduce their financial risks. A new study shows that
nonprofit hospitals tended to increase prices for private
insurers in order to cope with the risks associated with Medicare
patients. However, hospitals did not seem to respond to the
riskier PPS environment by selectively admitting less costly
patients, perhaps because in some cases, Medicare shares the risk
by special allowances (about 5 percent of PPS inpatient spending)
for "outlier" patients with unusually high costs for their
diagnostic group.
Hospitals in States with hospital rate-setting programs had lower
prices for privately insured patients and less risk-reduction
behavior irrespective of PPS. State programs that establish rates
for certain procedures not only restrain prices but also
deliberately spread the costs for indigent and high-risk patients
across payers and hospitals during the 1980s.
More recently, private health insurers have attempted to protect
themselves against hospital price increases by seeking new
contractual arrangements with hospitals through preferred
provider organizations (PPOs) and exclusive contracts. If such
developments strongly limit the ability of hospitals to raise
prices, then more patient selectivity (preference for lower-risk
and less costly patients) and lower cost treatments (reduced
testing and length of stay) may result, caution the study's
authors, Bernard Friedman, Ph.D., of the Agency for Health Care
Policy and Research's Center for Delivery Systems Research, and
Dean Farley, Ph.D., M.P.A., formerly of AHCPR and now with HCIA
Software Systems, Inc. Their findings are based on data from the
National Hospital Cost and Utilization Project (HCUP-2), a
database maintained by AHCPR that includes a national panel of
over 400 hospitals providing information from patient discharge
abstracts, hospital financial reports, and county-level
information from 1980-1987.
Details are in "Strategic responses by hospitals to increased
financial risk in the 1980s," by Drs. Friedman and Farley, HSR:
Health Services Research 30(3), pp. 467-488, 1995.
Health plans that restrict choice of provider attract
healthier members
Health maintenance organizations (HMOs) and exclusive provider
organizations (EPOs), which restrict enrollees' choices of health
care providers, attract healthier elderly and nonelderly members
than traditional fee-for-service (indemnity) health insurance
plans, concludes Fred J. Hellinger, Ph.D., of the Center for Cost
and Financing, Agency for Health Care Policy and Research. His
review of the literature suggests that the most important reason
HMOs and EPOs attract healthier members is that individuals who
use large amounts of health resources often are unwilling to
sever ties with their health care providers and switch to
providers who are affiliated with an HMO or EPO (preferred
provider organization [PPO] that does not provide reimbursement
for services supplied outside the network).
For example, employees of a large Midwestern manufacturing firm
were offered an option in 1986 of staying in the company's
traditional indemnity plan or joining one of two EPOs. The
average expenditure per eligible individual during the year
immediately before the EPO offering was $821 for those who
remained in the standard indemnity plan and $596 (27 percent
less) for those who switched to the EPO. In addition, it may be
that HMOs and PPOs with large networks of providers experience
less favorable selection than HMOs and PPOs with smaller
networks, since persons who have strong ties to health providers
are more likely to join if their provider is a member of the
network.
For more information, see "Selection bias in HMOs and PPOs: A
review of the evidence," by Dr. Hellinger, in the Summer 1995
issue of Inquiry 32, pp. 135-142.
HMOs enroll younger members than fee-for-service plans
A new study by researchers at the Agency for Health Care Policy
and Research suggests otherwise. It shows that health maintenance
organizations (HMOs) tend to enroll younger members who use fewer
services than traditional fee-for-service (FFS) plans. Amy K.
Taylor, Ph.D., Karen M. Beauregard, M.H.A., and Jessica P.
Vistnes, Ph.D., of AHCPR's Center for Health Expenditures and
Insurance Studies, compared the health status and
sociodemographic characteristics of HMO and FFS enrollees. They
used data from the 1987 National Medical Expenditure Survey, a
nationally representative survey of the civilian
noninstitutionalized population, and the Health Insurance Plans
Survey.
Comparisons showed that a higher percentage of HMO than FFS
members were younger than 17 years and between 25 and 44 years of
age, and a smaller percentage of HMO members were over age 45.
However, perceived health status, days confined to bed, work
limitations, and proportion of persons with three or more chronic
conditions or health risks (such as smoking or lack of regular
exercise) were similar for the two groups. The percentage of
enrollees with diabetes, cardiovascular disease, or cancer was
lower among HMO than FFS members. Although these differences were
statistically significant, they were a small proportion of the
insured population.
The researchers suggest that HMOs attract younger people who are
planning their families and having children, because pediatric
preventive health care services and maternity care often have
lower out-of-pocket costs in HMO than FFS plans. Also, unlike
many older patients, young families have not yet formed strong
ties to physicians who may not be part of the HMO provider
network. The researchers conclude that style of medical care
delivery, such as physician compensation method and controlling
the use of medical services, may be more important than enrollee
health status in determining the costs of medical care in
different types of health insurance plans.
See "Who belongs to HMOs: A comparison of fee-for-service versus
HMO enrollees," by Dr. Taylor, Ms. Beauregard, and Dr. Vistnes,
in the September 1995 Medical Care Research and Review 52(3), pp. 389-408.
Direct costs for TB exceed $700 million per year
The resurgence of tuberculosis (TB), which increased in incidence
by 20 percent between 1985 and 1992, has taken a heavy toll in
terms of the Nation's health care expenditures, according to Lynn
Bosco, M.D., M.P.H., of the Center for Outcomes and Effectiveness
Research, Agency for Health Care Policy and Research, and her
coauthors. Estimated direct costs for TB amounted to $703.1
million in the United States in 1991, and more than half of these
costs were for inpatient care, due to the trend toward
hospitalizing TB patients, notes Dr. Bosco.
The researchers used existing databases, surveys of State and
local TB programs, and interviews of organizations that conduct
large-scale TB screening to estimate the 1991 direct expenditures
for TB-related diagnosis, treatment, and surveillance activities.
They calculated a total of $703.1 million in direct costs,
including $423.8 million for inpatient care. Other expenditures
included $182.3 million for outpatient care, $72.1 million for
screening, $3.4 million for contact investigations, $17.9 million
for preventive therapy, and $3.6 million for surveillance and
outbreak investigations.
Expenditures for prevention (including screening, contact
investigations, and administration of preventive therapy for
latent TB infection) and surveillance activities accounted for
only 14 percent of total TB expenditures compared with 86 percent
for care of patients with active or suspected disease.
The researchers conclude that improved use of TB preventive
therapy and outpatient therapy in high-risk populations may be
cost-beneficial, given the high costs associated with inpatient
treatment for TB. They also express concerns about the lack of
cost accounting systems in State and local health departments.
See "Health-care expenditures for tuberculosis in the United
States," by Ruth E. Brown, M.S., Bess Miller, M.D., M.Sc.,
William R. Taylor, M.D., M.P.H., Cynthia Palmer, M.S., Lynn
Bosco, M.D., M.P.H., and others, in the Archives of Internal
Medicine 155, pp. 1595-1600, 1995.
Tort laws and other factors influence dentists' decisions to
carry more malpractice insurance
Dental malpractice claims rose 2.5 times in 5 years, and claims
payment per award increased about five-fold between 1988 and
1991. A dentist's decision to purchase greater amounts of
malpractice liability insurance (with a higher payment limit per
incident) is influenced by State tort law, the State
population-to-lawyer ratio, and whether or not the dentist has
been sued for malpractice in the past, according to a study
supported by the Agency for Health Care Policy and Research
(HS06554).
Peter Milgrom, D.D.S., and colleagues at the University of
Washington surveyed a random sample of 3,048 dentists drawn from
data of the American Dental Association (ADA) in 1992. For
dentists who were carrying insurance, the policy limits per
incident ranged from $100,000 to more than $2 million. The most
common limit per incident was $1 million (55 percent) with an
additional 4 percent of policies having a limit of $2 million or
more. Policy limits per year ranged from $200,000 to more than $3
million, with the latter being the most common limit specified
(43.9 percent).
The likelihood of maintaining the higher per-incident limit was
increased for dentists who had a complaint filed against them
within the last 5 years. The larger group of dentists, with a
per-incident limit of less than $1 million, lived in areas that
averaged 513 people per lawyer, compared with dentists living in
areas with an average of 490 people per lawyer, who had policies
with a per-incident limit of at least $1 million.
Pro-defendant provisions of percentage fault liability, limits on
joint and several liability, and period payment allowances,
reduced the probability that a dentist would elect higher
per-incident policy limits from 1.3 to 1.6 times. Tort limits on
damage recovery had opposite and unexplained effects. Binding
arbitration increased the probability that dentists would choose
higher policy limits, since the costs of such arbitration are
likely to increase premiums in a system where most claims are
settled out of court (about 70 percent), and many are settled
without the involvement of attorneys.
Details are in "Tort reform and malpractice liability insurance,"
by Dr. Milgrom, Coralyn Whitney, Ph.D., Douglas Conrad, M.H.A.,
M.B.A., Ph.D., and others, in Medical Care 33(8), pp.
755-764, 1995.
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