Abstract
Healthcare financing and insurance is changing everywhere. We want to understand the impact that financial pressures can have for the uninsured in advanced economies. To do so we focus on analyzing the effect of the introduction in the US of managed care and the big rise in financial pressures that it implied. Traditionally, in the US safety net hospitals have financed their provision of unfunded care through a complex system of cross-subsidies. Our hypothesis is that financial pressures undermine the ability of a hospital to cross-subsidize and challenges their survival. We focus on the impact of price pressures and cost-controlling mechanisms imposed by managed care. We find that financial pressures imposed by managed care disproportionately affect the closure of safety net hospitals. Moreover, amongst those hospitals that remain open, in areas where managed care penetration increases the most, they react by closing the health services most commonly used by the uninsured.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
US Census Bureau.
Dumping occurs when a hospital transfers an emergency patient to another or simply refuses any treatment based on the patient’s inability to pay.
Dumping occurs when a hospital transfers an emergency patient to another or simply refuses any treatment based on the patient’s inability to pay.
Uncompensated care includes bad debt and charity care provided by the hospital.
This study of the American Hospital Association (AHA) calculates that the average paying hospital patient subsidizes charity care by paying a “hidden tax” of 10.6 %.
Those hospitals that have a higher burden of charity care also provide care to a higher proportion of Medicaid patients (AHA).
Fournier and Campbell (1997) find evidence showing that hospitals in Florida that provide greater amounts of care for the poor are systematically awarded licenses for certificate-of-need approval.
Dumping occurs when a hospital transfers an emergency patient to another or simply refuses any treatment based on the patient’s inability to pay.
Managed care plans, especially those that are more integrated such as HMOs offer more preventive services than fee-for-service (Weiner and de Lissovoy 1993). Glied (1999) argues that managed care contracts used to offer better maternity and preventive care. Extensive literature look at the impact of such preventive care emphasis on the costs of managed care and the type of patients it can attract (Frank et al. 1998).
References
American College of Physicians-American Society of Internal Medicine. (2000). No health insurance? It’s enough to make you sick. Philadelphia: American College of Physicians-American Society of Internal Medicine.
American Hospital Association. (1986). Cost and compassion: Recommendations for avoiding a crisis in care for the medically indigent. Chicago: American Hospital Association.
American Hospital Association. (2012, January). American Hospital Association. Uncompensated Hospital Care Fact Sheet.
Baker, L. (1994). Does competition from HMO affect fee-for-service physicians? NBER Working Paper 4920.
Baker, L. (1997). The effect of HMOs on fee-for-service health care expenditures. Evidence from Medicare. Journal of Health Economics, 16(4), 453–481.
Baker, L. (1999). Association of managed care market share and health expenditure for fee-for-service Medicare patients. Journal of the American Medical Association, 281(5), 432–437.
Baker, L., & Corts, K. S. (1996). HMO penetration and the cost of healthcare: Market discipline or market segmentation. American Economic Review, 86(2), 389–394.
Baker, L., & Shankarkumar, S. (1997). Managed care and health care expenditures: Evidence from Medicare, 1990–1994. NBER Working Paper 6187.
Cousineau, M. (1997). Health status of and access to health services by residents of urban encampments in Los Angeles. Journal of Health Care for the Poor and Underserved, 8(1), 70–82.
Currie, J., & Fahr, J. (2001). Hospitals, managed care and the charity caseload in California. NBER Working Paper 8621.
Currie, J., & Reagan, P. (1998). Distance to hospital and children’s access to care: Is being closer better, and for whom? NBER Working Paper 6836.
Cutler, D., & Barro, J. (1997). Consolidation in the medical care marketplace: A case study for Massachusetts. NBER Working Paper 5957.
Cutler, D., & McClellan, M. (1996). The determinants of technological chance in heart attack treatments. NBER Working Paper 5751.
Cutler, D. M., & Sheiner, L. (1998). Managed care and the growth of medical expenditures. NBER Working Paper 6140.
Duke, K. (1996). Hospitals in a changing healthcare system. Health Affairs, 15(2), 49–61.
Fournier, G. M., & Campbell, E. S. (1997). Indigent care as quid pro quo in hospital regulation. The Review of Economics and Statistics, 79(4), 669–673.
Frank, R., Glazer, J., & McGuire, T. (1998). Measuring adverse selection in managed health care. NBER Working Paper 6825.
Freeman, H., Aiken, L., Blendon, R., & Corey, C. (1990). Uninsured working-age adults: Characteristics and consequences. Health Services Research, 24(6), 811–823.
Freeman, E., & Corey, C. (1993). Insurance status and access to health services among poor persons. Health Services Research, 28(5), 531–541.
Glied, S. (1999). Managed care. NBER Working Paper 7205.
Gold, M. R., et al. (1995). A national survey of the arrangements managed care plans make with physicians. New England Journal of Medicine, 333(25), 1678–1683.
Goodman, D. C., Fisher, E. S., Stukel, T. A., & Chang, C. (1997). The distance to community medical care and the likelihood of hospitalization: Is closer always better? American Journal of Public Health, 87, 1144–1150.
Hadley, J., & Mitchell, J. M. (1999). HMO penetration and physicians’ earnings. Medical Care, 37(11), 1116–1127.
Mas, N., & Seinfeld, J. (2008). Is managed care restraining the adoption of technology by hospitals? Journal of Health Economics, 27, 1026–1045.
Richardson, E. (1999). Managed care and access to care by the poor (mimeo).
Sloan, F., Morrisey, M., & Valvona, J. (1986). Hospital care for the ‘Self Pay’ patient. Journal of Health Politics, Policy and Law, 13, 83–102.
Staiger, D., & Stock, J. H. (1997). Instrumental variable regression via weak instruments. Econometrica, 65, 557–586.
Stern, R., Weissman, J., & Epstein, A. (1991). The emergency department as a pathway to admission for poor and high-cost patients. JAMA, 266(16), 2238–2243.
The Kaiser Commission on Medicaid and the Uninsured. (2008). The uninsured: A premier. Key facts about Americans without health insurance. http://www.kff.org/uninsured/upload/7451_04.pdf.
Weiner, J. P., & de Lissovoy, G. (1993). Razing a Tower of Babel: A taxonomy for managed care and health insurance plans. Journal of Health Politics, Policy and Law, 18(1), 75–103.
Acknowledgments
I am grateful to SP-SP Research Centre for research support. I thank David M. Cutler; Bruno Cassiman, and the many participants in the Harvard Public Finance Research Seminar and Workshop and in the ASHE Meetings for comments on a previous draft. I am also grateful to Mireia Raluy and Ona Vilanou for outstanding research assistantship. Financial support from Ministerio de Educación y Ciencia ECO2009-13169.
Author information
Authors and Affiliations
Corresponding author
Appendix
Rights and permissions
About this article
Cite this article
Mas, N. Responding to financial pressures. The effect of managed care on hospitals’ provision of charity care. Int J Health Care Finance Econ 13, 95–114 (2013). https://doi.org/10.1007/s10754-013-9124-7
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10754-013-9124-7