The Medicaid DSH Program and Providing Health Care Services to the Uninsured

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Executive Summary

Perhaps the most important health policy issue facing the United States is how to care for the uninsured. In 1999, 42 million people had no health coverage, more than one out of every six Americans under age 65. Uninsured individuals often lack access to appropriate care, but they still use health services when they become ill and, in many cases, they do not have the financial resources to fully pay for their care. Hospitals, in particular, serve as providers of last resort for the uninsured. Through various public programs—local, state, and federal—many hospitals receive subsidies to help pay for the costs associated with uncompensated care. One of the largest subsidy programs is the Medicaid disproportionate share hospital (DSH) program. Medicaid DSH represents an important funding source for hospitals in their efforts to care for the uninsured in the communities that they serve.

This study provides some insights on the experiences of five programs that have used Medicaid DSH funds to enhance care for the uninsured. We examined five current programs located in Denver County (Denver), Colorado; Marion County (Indianapolis), Indiana; Ingham County (Lansing), Michigan; Wayne County (Detroit), Michigan; and Bexar County (San Antonio), Texas. These programs were chosen, in part, to reflect a diverse set of design choices with regard to target population, organization, financing, delivery system, and services provided. It was also important that they all appeared to be sustainable over the long term. Finally, an attempt also was made to include programs that represent a variety of economic and other environmental conditions. This study, which was financed by the United States Department of Health and Human Services, was intended to provide background information for the Community Access Program, a major department initiative designed to provide grants to localities to improve health care access for the uninsured.

LESSONS LEARNED

While each program is unique and faces its own set of circumstances, there are several lessons that can be learned from the study programs which can guide other communities as they look to find local solutions to the growing problem of caring for the uninsured.

Understand all of the financing options. Medicaid DSH can be a critical financing component of local health care safety nets. Indeed, without DSH, some of the programs we studied would not be financially viable. However, DSH was never the sole funding source for the programs. Instead, study communities relied on a combination of funding streams. Local leaders will need to assess how to structure program financing that is in keeping with available resources.

Build political support. Political support is critical to both the development and sustainability of the program. Without exception, program administrators stressed the importance of securing local and, sometimes state, support of policymakers in developing an initiative. Having solid political backing is central to gaining and keeping program financial support and ensuring long-term success.

Use existing programs as a starting point. Communities should examine existing indigent care programs as a starting point for creating a new program. All of the study sites began the development of the new initiative with a pre-existing health care program or programs. In some cases, the local community simply revamped an existing program. By contrast, in other communities a broader policy change brought about a fundamental restructuring of an existing program.

Start with primary care. If a comprehensive system of care is not initially feasible, localities should start with a limited set of services. A good first step is to start with primary care and drugs. Then add specialist care, followed by inpatient care. By starting with primary care, a program can cover more people with the same amount of money which allows the program to build momentum and community presence.

Apply insurance concepts to programs without actually offering insurance. All of the programs examined were modeled like health insurance but in fact, were not insurance. By adopting such a strategy communities were able to avoid state insurance regulations, minimum reserve requirements, reporting requirements and the like. Such an approach is a big plus as its is considerably less expensive than developing a regular insurance product.

Plan carefully. In designing their programs, communities need to account for a range of factors. For example, each community must decide what is the target population of the program. Related to defining the target population, localities will need to development a marketing and outreach plan. They will also need to decide the scope and depth of services offered through the program as well as whether they want to impose co-payments on participants.

Develop strategies to get previously uninsured individuals to access the health care system in a new way. Many individuals enrolled in these programs are accustomed to using the emergency room as their usual source of care. Getting these people to access health care in a new way—for example, by way of a physician office or clinic—is often critical to the success of the program.

CONCLUSIONS

This study has examined five programs that have used Medicaid DSH funds to enhance the provision of care to uninsured populations. While each of the initiatives relied on DSH in varying degrees, DSH was a very important source of funding for all programs. Although the Medicaid DSH program sometimes has been a contentious policy issue, the programs examined here highlight how DSH funds have been used in a positive way: To provide health care services to the uninsured. By emphasizing primary care services, all of these programs, as diverse as they are, aim to reduce hospitals' uncompensated care burdens, one of the principal goals of the DSH program.

Policymakers, both state and federal, should look again at the possible opportunities afforded by the DSH program. In 1998, more than $15 billion was spent through the DSH program. Further, about $3 billion of available DSH monies went unspent in that year. With the passage of the Benefits Improvement and Protection Act of 2000 (BIPA), DSH spending will likely rise in the future: scheduled cutbacks in federal DSH spending were eliminated and, now many states are allowed to increase their DSH spending. Given the growing number of uninsured, the need to provide services to this population in a more rationale, efficient way will become increasingly important in the future. The programs studied here provide models by which states and localities could provide such services using Medicaid DSH funding.

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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.