Costs of Caring for Uninsured People in Maine

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Abstract

This study, funded by the Maine Health Access Foundation, presented alternative estimates of the costs of health care that uninsured Maine residents receive and determined how much public revenue was available to offset those costs. Using data from health care providers, the study estimated that the costs of caring for the uninsured in Maine were $138 million in 2005, with hospitals and Veterans' Affairs facilities identified as the largest providers. Estimates based on household survey data from the Medical Expenditure Panel Survey showed that uncompensated care costs for the uninsured were only $81 million in 2005. The report discusses possible reasons for the large discrepancy between these two sources. Our review of federal and state funding sources in 2005 suggests there were roughly $110 million available to offset these costs of caring for the uninsured.

Executive Summary

In this report, we provide estimates of the costs of uncompensated care that the 124,000 uninsured Maine residents received in 2005 and the revenues that may have been available to offset these costs. We use two alternative approaches to estimating uncompensated care costs of uninsured people. In the first approach, we draw on data reported by health care providers and public programs. The second approach uses household survey data on health care expenditures and, as such, develops estimates based on information reported directly by uninsured people. Prior to enumerating the sources of funds that offset the uncompensated costs of care for uninsured patients, we provide some background on the recent evolution of health policy and health care delivery in Maine. The information on the funding for uncompensated care is drawn from federal, state and local budget reports as well as from trade association materials and a series of interviews with key respondents.

According to our analysis of provider/program data, hospitals are the largest provider of uncompensated care to uninsured Mainers, accounting for $78.7 million in 2005. Office-based physicians provided another $10.2 million in uncompensated care. Among government programs and providers, the largest amount of uncompensated care to uninsured Mainers came through Veterans' Affairs hospitals and clinics ($33.0 million). Other government providers included community health centers ($8.7 million) and the Indian Health Service (IHS) ($7.5 million). Across all providers for which we had data, we estimate that uninsured people in Maine received about $138 million in uncompensated care in 2005.

According to estimates based on household survey data collected by the Medical Expenditure Panel Survey (MEPS), uninsured adults received an average of $1,277 in care and uninsured children received $1,382 in care. Personal out-of-pocket spending is the largest source of payment for care received by uninsured people (37%). Since some uninsured people have coverage for a portion of the year, private insurance and Medicaid pay for 9% of their care. Workers' compensation, an insurance system for paying the medical care costs of injured workers, pays for about 3% of care for uninsured people. The remaining catagories of reported spending represent uncompensated care and account for about 51% of the care received by uninsured Mainers. The first category of uncompensated care for uninsured Mainers is “other public sources” and accounts for 23% of the care. This includes care provided by facilities run by Veterans' Affairs, other federal programs, and other state and local programs. The second category—care financed by other private payments and payments from unknown sources—is 2005 costs of uncompensated care for uninsured people in maine maine hospitals office-based physicians veterans' affairs hospitals & clinics community health centers indian health service $78.7 $10.2 $33.0 $8.7 $7.5 total $138 million (all figures in millions) costs of caring for uninsured people in maine responsible for 9% of care to uninsured Mainers. Donated care from private sources of payment is the final category of uncompensated care and represents 19% of care to uninsured Mainers. These three categories of spending on uncompensated care for Maine's uninsured people totaled $81 million dollars in 2005.

The estimates of uncompensated care received by uninsured people derived from provider/program data and household survey data are not identical. The MEPS data used for the household survey estimates are known to understate spending relative to the National Health Expenditure Accounts (NHEA) and, although we made adjustments to align the MEPS and NHEA aggregates, it is possible that the MEPS estimates could still understate costs. Moreover, the MEPS data are from all surveyed households in the Northeast region as opposed to only Maine. Although we adjusted the Northeast data so that our estimates reflect the demographic characteristics of Maine's population, it is also possible that there may be unique features of Maine's state policies and delivery system that are not adequately captured in these adjustments.

The provider/program data are also imperfect. We are aware that not all providers who care for uninsured patients could be included in the cost estimates based on provider data (e.g., clinics other than Federally Qualified Health Centers, or FQHCs), but interviews suggest that we have captured the bulk of providers' costs of caring for uninsured Mainers. In addition, there are several data elements used in the calculations that are measured imprecisely and some assumptions that influence the various components of the overall estimate. On balance, we think the household survey estimates should be viewed as a lower bound on the costs of care to uninsured people in Maine, while the provider/program estimates may potentially overstate the actual costs of care.

We also reviewed the range of funding that is available to providers to offset the costs of providing uncompensated care to uninsured Mainers. Our goal is to provide a snapshot of funding that subsidizes uncompensated care in 2005 for uninsured Mainers, as opposed to assessing any broader policy approaches or strategies the state may be pursuing (e.g. Dirigo Health Reform). Even after Maine's coverage expansions, there are many uninsured people in Maine. Care for these people is provided by a patchwork of organizations, such as hospitals, clinics, and direct public providers, with funding coming from Medicaid, Medicare, federal grants and other federal programs, the state and localities. We also describe the myriad important, yet often smaller or more fragmented pieces of the delivery system whose revenue streams were so varied they were difficult to quantify. We believe that most public revenues are in the quantifiable section, but recognize that it is important to understand the roles played by the range of providers.

Our estimate of public sector revenue currently supporting uncompensated care for uninsured Mainers is approximately $110 million. However, because of the more fragmented pieces of the system that we identified but were not able to quantify, more than $110 million is likely available to fund care to uninsured Mainers. About 93 percent of the quantifiable public support in Maine comes from the federal government with 7 percent from states and localities. The picture in Maine is considerably different from the national average, which shows that state and local funds typically constitute about one-third of public support. The reason that Maine appears to be so different, in part, is that the state has shifted funding toward a coverage expansion rather than providing subsidies for uncompensated care.

In aggregate, these estimates suggest that the 2005 public revenues in the system to support care to uninsured people are somewhat below the costs of the care they receive. Beyond the magnitude of the estimates, perhaps the major point to take away from this report is that the presence of large numbers of uninsured people and their inevitable need to receive health care has resulted in a complex mosaic of government programs and private initiatives to defray the costs of that care. In the absence of large public hospitals or subsidies to offset the costs of care to uninsured Mainers (such as those often provided as Medicaid DSH payments), understanding how providers in Maine serve uninsured patients will require further study.

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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.

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