Providing Primary Health Care to Children: Integrating Primary Care Services with Health Insurance Principles

Transcription

1 Providing Primary Health Care to Children: Integrating Primary Care Services with Health Insurance Principles Sara Rosenbaum Issue Editor s Note Sara Rosenbaum, J.D., is senior research staff scientist at the Center for Health Policy Research, The George Washington University. Primary health care systems that furnish comprehensive family-centered and community-responsive care in ways that take into account the unique circumstances and health care needs of the patients they serve are important to children and families. Yet many of the services that make primary care effective have traditionally not been financed through private health insurance, and direct grants to providers to underwrite these services for low-income families are typically underfunded. In this paper, Sara Rosenbaum of the Center for Health Policy Research at The George Washington University examines how health care reform might be structured to provide support for a package of primary care services which are responsive to the special needs of all families, regardless of their socioeconomic status. Rosenbaum evaluates two basic approaches, direct grants to providers and expanded health insurance coverage, that might be used alone or in combination to help families pay for primary care. She finds that, although grant-based financing has several benefits, the history of grant programs shows the problems inherent in relying heavily on grant funding to support primary health care systems. Grant programs have tended not merely to grow slowly, but to decline in real-dollar terms over time despite a greater need for more intensive services among certain populations. Although such declines might be avoided by building controlled but automatic growth into grants, this has not occurred. Accordingly, if one goal of health care reform is to assure access to comprehensive and responsive primary care, it may be appropriate to consider other sources of third-party support for the service. Given the tendency to finance health care through insurance in the United States, the author explores the advantages of an expanded role for insurance-type financing of pediatric care. A special Medicaid payment system developed by New York State for public and nonprofit, primary health care programs provides a successful real world example of the approach Rosenbaum has in mind. The New York payment system, described in detail in this paper, incorporates a number of elements that are key to effective primary care. A broad array of medical, health-related, and familyresponsive services are covered. Payment is made for services furnished by a variety of health professionals working in many different accessible service settings, such The Future of Children HEALTH CARE REFORM Vol. 3 No. 2 Summer/Fall 1993

2 as schools, day care and teen centers, and homeless shelters, so long as the health care site is authorized by New York State through the provider s operating certificate. New York State s payment methodology (which has been adapted for office-based pediatric practices, as well) is designed to be both all-inclusive and cost-efficient. Payments are made on the basis of prospective negotiated rates which take into account providers reasonable cost of furnishing both medical care and the types of supportive, health-related services that promote accessibility, such as outreach, case management, and translation. In addition, productivity standards are built into the payment system to help control costs. The payment principles embodied in New York s Medicaid program are applicable to insurance generally. Incorporation of a similar set of principles in health care reform may prove an effective way to underwrite responsive primary care that families from all socioeconomic backgrounds need. E.L. One of the most important issues in health care for children is assuring adequate financial support for primary care. In the context of this paper, the term primary health care refers to care that provides a first entry point into the general health care system, furnishes continuous care for any particular spell of illness or condition, emphasizes the establishment of a longitudinal relationship between patients and health providers, furnishes or arranges for all health care and related services a child might need, and is both family-responsive and community-oriented. 1 Included in primary care are preventive services; services for the treatment of the normal, chronic, and acute care problems which arise during childhood; and early detection, treatment for, and management of chronic illnesses and conditions that can impair children s normal functioning. Despite the fact that most children are healthy, routine health care for children can be expensive. Many traditional indemnity-type health insurance plans do not pay for preventive care and require cost sharing for care for routine illnesses. As a result, even families who are not poor and who have health insurance may delay obtaining basic forms of effective health care for their children. 2 In addition to financial considerations, there may be other reasons families underutilize primary care for their children. Barriers to utilization might include a lack of understanding of the importance and value of certain primary care services, lack of familiarity with an increasingly complicated health care system, cultural differences and language hurdles, and geographic and travel impediments. 3 If families underutilize primary care for their children, their children s health and development may suffer, and long-term health and social costs may rise. Given the importance of health care for children and the important health and social goals it promotes, as well as the difficult economic circumstances which many families with young children face, 4 it may be good policy to subsidize the costs of certain primary care services for children. How to support these services effectively, however, is open to debate.

3 62 THE FUTURE OF CHILDREN SUMMER/FALL 1993 This article examines two principal means of providing financial support for primary care: direct grants to providers and health insurance-type payments on behalf of enrolled patients. It concludes that, in light of the limitations of grantbased funding (at least as we know it today), as well as the nation s tendency to rely on health insurance as the principal means of third-party payment for health care, 5 an expanded role for health-insurancetype funding in the area of primary pediatric care is necessary. The article describes a model, taken from the New York State Medicaid program, for paying for primary health care furnished by public and private nonprofit providers and explores its applicability to privately insured populations. The issue of whether to subsidize the cost of primary health care for children through insurance payments on behalf of beneficiaries rather than through direct grant payments to providers is particularly timely. Increasingly, health insurers are evolving from simple bill payers into integrated financing and service delivery networks. As the cost of even basic health care grows and the trend toward combining payment and service delivery grows for The value of improving primary pediatric care financing may go beyond cost-saving considerations. public and private insurers alike, the question of how the primary care system should function becomes more important. Increasingly necessary are payment principles that both encourage families to use the most effective primary health services and assure that providers furnish these services. Indeed, the growing integration of health care financing and service delivery renders obsolete longstanding notions of insurance coverage as simply a buffer against high-cost medical expenses. As insurance becomes a direct means of supporting and prepaying the cost of health care delivery, traditional notions of health insurance become outdated. The task of integrating models of service delivery with cost-efficient payment principles should build on what is known about effective primary pediatric health care. Improving the financing of primary health care may have financial payoffs. 6 But the value of improving primary pediatric care financing may go beyond costsaving considerations. Congressional commissions, the U.S. Department of Health and Human Services, and expert panels have also called for expanded primary health care for numerous reasons. Among these are the increasingly complex nature of many childhood health problems which arise from deteriorating social and economic conditions, the greater survival of children with multiple disabilities who can be cared for in community settings but who require ongoing attention and intervention, and the perceived effects of accessible primary health care on families understanding of, and skill in using, the health care system for their children. 7 Key Elements of Primary Care Financing Because primary pediatric health care may require a variety of nonmedical services to be truly effective, primary care financing systems will need to assure funding for more than traditional medical benefits 8 in the absence of other sources of funding for these activities. For example, services that help improve access to primary care can be seen as a response to the nonfinancial health care barriers that confront many children and families. These impediments to health care access can affect even families who are insured for basic medical care. Removing these barriers may require paying for certain relatively low-cost but important activities such as outreach, patient education, transportation, translation, case management, and other forms of assistance in obtaining needed medical, health, social, and other health-related services. Numerous studies have identified several types of nonfinancial barriers to care. 9 These include low educational attainment, the stresses caused by low family income, geographic isolation from sources of primary health care (a problem that confronts both inner city and rural residents), language barriers, cultural barriers, and fear of the health care system. 10 Special family and child health needs also must be accommodated to achieve

4 Providing Primary Health Care to Children 63 access to effective primary health care. For example, providers furnishing primary health care to children with significant disabilities may need to adapt their care arrangements in certain ways. Home visiting might be required. Special communications personnel or equipment might be needed. Additional personnel skilled in caring for children with physical or mental disabilities may be essential. Very young parents need primary care providers for themselves and their children who are trained in the management of adolescent-parent-headed families. Similarly, certain children, such as migrant children, face added health risks that require special management and interventions. Adolescents in families of all income levels generate potential added health problems by their risk-taking behavior, their growing need for independence, and their unwillingness to use care that is not adapted to meet their needs for independence and confidentiality. Effective health care financing will permit primary health care systems to adapt to these and other special needs. Models for Financing Primary Care for Children: Insurance versus Grants Once policymakers agree on the need to subsidize effective primary health care for children, the issue becomes how to provide the subsidy. One possible approach is through direct grants to some or all health care providers. (In this discussion, grant-related financing refers to a government allocation of funds directly to particular providers, especially those caring for children facing added barriers to primary health care, to underwrite the provision of specific services.) Another is expanded health insurance coverage and more generous reimbursement for certain services. (In this discussion, insurance financing refers to a procedure whereby payment for services flows through the recipients to the providers of services.) Neither avenue is exclusive, and both have decided strengths and weaknesses. Grant-related Financing The United States has only a limited history of using grants to help support providers who face added costs in furnishing personal health care. With only a very few exceptions, grant-based financing has focused on providing limited underwriting for programs serving low-income and medically underserved patients. 11 State and local governments traditionally have The United States has only a limited history of using grants to help support providers who face added costs in furnishing personal health care. funded activities of local health departments, public hospitals, and community clinics through grants. Principal examples of federal grant-based programs that underwrite the costs of primary health care services are the community and migrant health centers programs, 12 the federal family planning program, 13 the Title V Maternal and Child Health Services Block Grant, 14 and the Preventive Health Services Block Grant. 15 Numerous other, smaller grant programs also help fund the provision of basic and specialized primary health care to certain populations. In theory, grants could be extensively used to support primary health services. Grant-based funding for primary care might have several benefits. Grants could be targeted directly to communities with the greatest need for subsidized primary care and to providers serving these communities and patients. The scope of grantfinanced services and, thus, the size of grant budgets could vary depending on the needs of a particular community. For example, in communities with large numbers of non-english-speaking persons, translation services could be built into a grant budget as an allowable cost. In rural or large urban service areas, the cost of mobile units could be built into a grant. Cost increases could be controlled through the use of tests of reasonableness and budgeting screens such as minimum productivity standards, upper allowable payment limits for salaries and administrative costs, and so forth. Grant requirements could be designed to assure that providers funded by or through grant programs meet certain minimum performance standards. Finally, a grant-based system might decrease the administrative costs associated with fee-for-service billing arrangements

5 64 THE FUTURE OF CHILDREN SUMMER/FALL 1993 Table 1 because grants could be made in periodic installments on the basis of estimates of the number of patients served. Unfortunately, in practice, grant programs (whether targeted only to low-income children or universal in scope) have not proven to be reliable and effective sources of funding for most services. 16 Virtually all federal health grant programs lack the two Most grant programs are financed at funding levels that are well below the amount needed for a reasonable level of operation. health care prices, patient mix, service intensity, the scope of services, and other relevant factors. But the current funding structure for grants does not follow this pattern. Most grant programs are financed at funding levels that are well below the amount needed for a reasonable level of operation. For example, at its current funding level, the community health centers program serves about 6 million of the 33 million to 43 million individuals who are medically underserved. 18 Thousands of additional health centers would be needed to reach all underserved persons. 19 An examination of funding levels over the past decade for federal primary care grant programs illustrates the extent to which funding has failed to keep pace with inflation. Table 1 shows funding levels for several key programs in fiscal year 1980 and fiscal year Also displayed is the elements that are critical for funding pri- amount that would have been needed in mary health care: a base funding level of fiscal year 1991 simply to keep program adequate size and an automatic adjust- funding at the same inflation-adjusted level ment mechanism to assure that spending as funding was in In 1980, none of levels stay consistent with reasonable levels these programs was fully funded; 21 moreover, every program in Table 1 shows real of service over time. It would be relatively simple to design funding declines between 1980 and grant programs that meet these objec- In some instances, real 1991 funding levels tives. Base appropriation levels for grant were barely half their 1980 levels, despite programs could be increased, and an- significant growth in both the number of nual funding levels could be adjusted low-income Americans and in serious pubautomatically 17 to reflect changes in lic and community health problems. Virtu- Appropriations for Selected Health Programs Fiscal Year 1980 Fiscal Year 1991 Program FY 1980 FY 1991 Appropriation Appropriation Appropriation needed in FY 1991 (in millions of (in millions of to equal real 1980 dollars) 1991 dollars) value of FY 1980 funding level* Community health $320 centers Migrant health centers $40 Title V MCH block grant $433 Family planning $162 Preventive health block $170 grant $478 $544 $52 $68 $587 $736 $144 $275 $91 $289 * Represents 70% growth from base year Source: Klebe, E. Appropriations for Selected Health Programs, FY 1980 FY Washington, DC: Congressional Research Service, October 24, 1991.

6 Providing Primary Health Care to Children 65 ally every other grant funding program for community primary health services shows a similar pattern. 22 Thus, the evidence suggests that it is unrealistic to rely on grant programs as currently designed to provide adequate underwriting of primary health care. Appropriation levels for these programs are not automatically tied to medical care inflation, nor are they automatically adjusted to take into account changes in patient numbers or service characteristics. Despite their shortcomings, grant programs have played an important role in proving the capital financing needed to acquire space and buildings, renovate existing facilities, lease or purchase capital equipment, recruit staff, underwrite the residual cost of operations, and engage in the countless other activities that go into establishing or expanding a primary care practice. In this sense, grant programs have made primary care available in communities where none might otherwise exist, just as 40 years ago the Hill Burton program s grants and loan repayment system fueled the development of hospitals in underserved areas. Insurance-related Financing The aggregate funding level limits inherent in grant financing do not pertain to insurance-type programs. In the United States, neither public nor private insurance is subject to global spending limits, as is true of grants. To be sure, most insurance plans contain extensive utilization and cost controls, and certain insurers such as Medicaid pay rates to providers that are significantly lower than even providers reasonable costs of furnishing covered services. 23 But unlike discretionary grants, an insurance plan (whether public or private) constitutes an enforceable contract between the insurer and the insured to pay for a specified set of benefits at a stated price. 24 Unlike the grant programs discussed above, all of which are subject to annual spending limits, insurers cannot simply refuse to pay for covered care and services on the grounds that they have run out of money. 25 A public or private insurer may over time increase the cost of premiums, eliminate or trim eligibility or benefits, 26 or drop payment rates as a cost-cutting measure. But because of the open-ended entitlement nature of health insurance, the coverage contract, once established, must be honored as a matter of law. Thus, unless specific modifications are adopted by insurers, their total spending will tend to grow automatically as prices rise and utilization by beneficiaries increases. Virtually all policymakers view the tendency toward uncontrolled spending by insurers as a fundamental and critical national policy problem. Yet at the same time, most health insurance programs seriously underfinance the cost of primary care in terms of both benefits covered and/or the rate at which payment is made. This remains true despite the fact that insurance has evolved from its origins as a means of protection against high medical costs into a form of prepayment for a wide range of both routine and high-risk care. 27 Health insurance has a measurable impact on children s use of primary health services. Given the tendency of Americans to rely increasingly on health insurance for payment for most forms of health care, it is timely to consider whether current principles of insurance coverage and payment for children are consistent with the definition of effective primary care. Health insurance has a measurable impact on children s use of primary health services. 28 The benefits that it covers, the service settings in which it pays for covered services, and the types of medical and health professionals and entities that qualify for payment all influence how well insurance underwrites primary health care. Comprehensive health insurance coverage for primary health services helps make pediatric practices viable. Conversely, insufficient health insurance coverage, coupled with families inability to pay for care out of pocket can seriously inhibit the use of pediatric care. 29 Adapting Health Insurance Payment Principles to Effective Models of Primary Care Health insurance that effectively finances the delivery of family-centered and community-responsive primary health care would contain the following features:

7 66 THE FUTURE OF CHILDREN SUMMER/FALL 1993 The scope of coverage would be broad. In addition to services required for the diagnosis and treatment of illness, coverage would include payment for preventive health services, such as immunizations, well-child exams, and preventive dental and vision care. The plan also would cover a wide range of mental health services and benefits for children with developmental disabilities. Also covered (either as separate benefit or as an incidental service) 30 would be such services as patient counseling and guidance and translation. Cost sharing would be kept low. Payment for exams, immunizations, and other preventive services would be made on a first dollar basis (i.e., without a deductible), so that families with few economic resources would not be deterred from seeking entry point care. This procedure would help ensure that providers furnishing primary and preventive health care for families without the means to supplement insurance payments would receive sufficient revenues from the entrylevel services they furnished. 31 With respect to other forms of primary care that go beyond the entry point, deductibles and cost sharing would be affordable in relation to family income. Services of all licensed health care professionals furnishing covered care would be reimbursed so long as they were working within the scope of their legal authority under state law. For example, psychiatrists, psychologists, social workers, and licensed mental health clinics all would be paid for the covered mental health services they furnish. This policy is particularly important for primary care programs located in medically underserved communities because of the difficulty many such programs have attracting and retaining sufficient numbers of physicians for their practices. Payment would be made for covered services furnished in settings that go beyond the traditional office practice. Such a policy would encourage the out-stationing of both first contact and continuity-of-care service points in strategic locations. Examples of such strategic locations are schools, mobile clinics, and home-based services. Payments would reflect (either as an allowable cost or as an added factor in a fee methodology) allowances for capitalrelated costs to support expenditures to expand service locations, enhance services, or strengthen certain types of primary care programs. Payment mechanisms would be kept simple so that primary health providers would not have to devote a major effort to getting paid. Examples of simplified payment mechanisms are all-inclusive encounter rates and per-capita payment rates (particularly in the case of managed care plans that pay participating providers on a prospective, capitated basis). In setting payment levels and controlling for cost increases, the plan would employ controls geared to primary care.

8 Providing Primary Health Care to Children 67 Upper payment limits for primary care services would be based on tests of reasonableness that reflect the emphasis primary care places on time and personal interaction, as opposed to technological expense. These upper limits would help keep the costs under control but would include the cost of community adaptation services such as translation, the use of specially trained personnel, outreach and transportation needed to adapt care to the needs of the population. Productivity standards would be set, but to encourage comprehensiveness, continuity, and service integration, these standards would allow for longer visits or for visits involving multiple health professionals furnishing care in a single setting. Capital and overhead costs would be held down through payment controls, but costs associated with expansion of primary care services into previously unserved areas or the addition or upgrading of needed services would be taken into account in setting initial payment levels and establishing annual permissible growth rates. New York s Primary Care Payment Model The New York State Medicaid program provides one example of a comprehensive primary care payment system. This payment system helps finance providers classified as diagnostic and treatment centers, 32 including both public and private nonprofit health care clinics offering primary health services, federally funded community and migrant health centers, health clinics operated by local public health agencies and public hospital authorities, and free-standing clinics operated by nonprofit institutions. New York has developed a special payment system for these clinics for several reasons. First, in New York State, as in so many states, Medicaid beneficiaries, like other low-income residents in the state, rely disproportionately on high-cost emergency rooms and lower-cost freestanding diagnostic and treatment centers such as community and migrant health centers for care. The survival of these free-standing centers (whose grant funding, like that for health centers nationally, has remained flat or has shrunk) is essential given the large numbers of underserved New Yorkers and their location in high-need communities. Second, the centers eligible for special Medicaid reimbursement tend to practice a type of primary health care that is particularly suited to the needs of low-income patients with multiple, complex health needs. Many are federally funded commu- Such services as outreach and translation... are particularly important in adapting primary care to the needs of lowincome and underserved families. nity and migrant health centers which offer such services as outreach and translation in addition to a broad array of medical, health, and social services. These services are particularly important in adapting primary care to the needs of lowincome and underserved families. 33 In an attempt to respond to the needs of its medically underserved patients, New York State has established dozens of community-based health clinics throughout the state. It has established a special payment mechanism for both its own statefunded centers and the more than 30 federally funded community and migrant health centers that operate in the state. This special payment mechanism is designed to compensate these centers for the cost of furnishing community-responsive primary health services and of expanding service sites and hours. Peekskill Area Health Center One of the federally funded community and migrant health centers reimbursed under the New York system is the Peekskill Area Health Center. The Peekskill health center is a comprehensive community health center with multiple sites in lowincome urban neighborhoods and surrounding rural areas. Sites served in the surrounding areas include parts of the Hudson River Valley in which migrant and seasonal farmer worker families live and work during a portion of each year. The center also maintains special programs for homeless individuals and families. The health center has operated since 1975, providing medical and health care to low- and moderate-income families. It

9 68 THE FUTURE OF CHILDREN SUMMER/FALL 1993 grew from a small, one-physician practice into an integrated system of comprehensive health care which serves more than 20,000 patients annually. These patients account for more than 90,000 visits to one of the center s two main service sites in Peekskill and Beacon, New York, as well as an additional 15,000 visits with staff working in a wide variety of satellite and outstationed sites. These out-stationed service sites are found in migrant camps, homeless shelters, schools, day care and Head Start programs, senior citizen meal sites, and in the center s mobile van. The declining role played by grant funds is the result of the declining real-dollar value of the grants and the increasingly important role played by nongrant sources of patient revenues. Children comprise nearly one-quarter of Peekskill s population and 40% of the health center s patients. The health center has targeted children as a key patient group because of their high poverty rate and their elevated health risks. The health center now provides services to 2,100 of the city s 4,500 children. The comprehensive primary services the health center offers in response to patient needs are displayed in Figure 1. Many of these services are heavily utilized by children. Through its team of medical and dental providers, outreach workers, and other service specialists, the center offers services ranging from comprehensive medical and dental care to supplemental food services through the WIC program, alcohol and drug treatment services to adolescents, school dental and social work services, and primary and preventive care to day care and Head Start children. All children served through Peekskill s various satellite programs can receive comprehensive services at the health center: that is, the center is able to offer not only basic well-child care but also ongoing diagnostic and treatment services for the complete health of the child. As with all health centers, the staff includes board certified physicians, dentists, nurse practitioners, physician assistants, and nurse midwives. Twenty-four-hour coverage and follow-up at the community hospital are also provided. There are formal referral agreements with area specialists (some of whom furnish care under formal contract with the health center). As a result, children with chronic health care problems can use the health center as their health care home. As a federally funded community and migrant health center, the Peekskill program derives some of its operating revenues from federal funds, with other revenues coming from a variety of state, local, and private sources, as shown in Figure 2. Other than funds provided by the federal government under the Community Health Centers program (the section 330 grant amounts shown in Figure 2), virtually all other grant funds are dedicated to specific classes of patients or activities and cannot be used to support general patient activities not related specifically to the specialized grant in question. For example, the center s HIV grants cannot be used to support general primary care services for patients not at risk for or infected with HIV. Moreover, both the general and specialized grants the health center receives cover only a proportion of the costs of the services they are meant to support. As Figure 3 shows, grants account for only one source of the health center s revenues. Despite the large number of grants the center receives, grants make up a declining proportion of the center s overall budget. Figure 3 shows that, in 1980, state, local, private, and federal grants accounted for 59% of the center s overall revenues. By 1991, grant revenues accounted for only 40% of all revenues. According to Anne Kauffman Nolon, executive director of the Peekskill program, the declining role played by grant funds is the result of two factors: the declining real-dollar value of the grants and the increasingly important role played by nongrant sources of patient revenues, including Medicaid, Medicare, and patient payments. Figure 3 also shows the growing importance of Medicaid to the center s nongrant revenues. In 1980, Medicaid payments represented 61% of all nongrant patient revenues. By 1991, Medicaid accounted for 71% of all nongrant revenues because of changes made by the state to improve Medicaid payment levels. These increased Medicaid payments are attributable to

10 Providing Primary Health Care to Children 69 Figure 1 Peekskill Area Health Center: A Community-oriented Primary Care Model PEEKSKILL AREA HEALTH CENTER, INC. Internal Medicine 1037 Main Street, Peekskill Obstetrics/Gynecology Dentistry Social Work Services HIV Testing, Counseling, and Treatment Health Education Translation Services Mental Health Referred Pharmacy and Radiology Transportation 24-hour Coverage Evening Hours Hospital Privileges Pediatrics Nurse Midwifery Care Optometry Podiatry WIC Nutrition Laboratory Outreach Health Source Medicaid Managed Care for Mothers and Children Child Health Plus for Uninsured Children MCH Program MOD Healthier Babies Campaign Midwifery Program WIC Nutrition Family Planning Well Women Services HIV Services Community Outreach and Education Case Management Primary Care Services NYS Anonymous Testing Site Project Hope/Pastoral Care BEACON CHC: Extension Clinic 372 Main Street, Beacon Family Medicine Internal Medicine Pediatrics Obstetrics/Midwifery WIC Nutrition HIV Counseling and Testing HOSPITAL LINKAGES/PRIVILEGES Westchester County Medical Center HIV Infectious Disease Specialist Hudson Valley Hospital Center at Peekskill/Cortlandt The Housing Preservation Co. Transitional Housing for Homeless Support Services Housing Management Permanent Housing Development Health Care for the Homeless Mobile Medical Van Primary Medical Care Dental Care Alcoholism Treatment Substance Abuse Services Mental Health Hudson Valley Migrant Health Care Family Medicine Pediatrics Dental Care WIC Nutrition Outreach Services Transportation Peekskill Pathways Outpatient Alcoholism Treatment Drug Free Counseling and Treatment Homeless Outreach Youth and Family Services Project RAP: HIV Education Project Bridge: Truancy Prevention Youth Employment Kids Bridge: Day Care Project Life: Human Sexuality Public Health Initiatives CDC Screening Participant WCDH Provider Breast Cancer Screening and Mammography Immunization Initiative Routine Screening for Lead, STDs and TB Smoking Cessation Groups Youth Services Network Youth and Stress Youth Employment Human Sexuality, HIV and Medical Services Drug and Alcohol Treatment and Prevention Community-based Initiatives Senior Nutrition Centers Child Care Agencies Eldercare at Barham House Source: Peekskill Area Health Center, 1037 Main Street, Peekskill, NY

11 70 THE FUTURE OF CHILDREN SUMMER/FALL 1993 Figure 2 Peekskill Area Health Center Community Health Care Network Grant Funds Federal New York State Westchester County Other Section 330 PCAP Outreach DSS March of Dimes Urban Health WIC Nutrition Truancy Prevention United Way Section 340 Transitional Housing for School Dental Health Homeless Assistance Day Care/Head Start Homeless Health Migrant Health Care DOH Municipal Support Section 329 AIDS Institute Preven- Preventive Health Town of Cortlandt Migrant Health tion and Treatment Services Village of Buchanan Town of Yorktown Family Planning Mental Health Comprehensive Prenatal Care PCI Development Substance Abuse and Alcoholism Services Ryan White Title Ill School-age Day Care Ryan White Title I CDC: STD Screening Dental Care Urban County Program Community Development Fund Source: Peekskill Area Health Center, 1037 Main Street, Peekskill, NY added coverage for certain services that are reimbursed by Medicaid (such as outpatient drug treatment and prenatal care for high-risk women), the higher proportion of patients (particularly pregnant women and children) covered by Medicaid, and the broad coverage and payment principles established for centers such as Peekskill under the New York Medicaid payment system. In 1991, more than one-third of all pediatric visits at the center involved children enrolled in Medicaid. 34 Medicaid thus covers a significant proportion of all pediatric patients served by the center. Because grant levels are declining, Medicaid revenues heavily influence the scope and depth of the center s pediatric practice. The New York Medicaid payment system supports the Peekskill health center and others like it in a variety of important ways. First, like all Medicaid programs for children today, it covers a broad array of primary care benefits for children. 35 Second, the system recognizes and covers these services when furnished by all not just some of the center s licensed staff (in some instances, under the supervision of another specified licensed professional). For example, routine dental care is covered by the state system whether furnished by a dentist or by a licensed dental hygienist under the supervision of a dentist. This means that encounters with psychologists and social workers (under the supervision of a medical doctor) and other mid-level professionals are billable encounters. Third, the state pays for services furnished in the wide range of settings in which the center makes health care available. Services furnished in migrant camps, schools, Head Start and day care programs, and other off-site locations are all reimbursable. Finally, the state sets payment rates designed to cover the reasonable cost of furnishing care to Medicaid patients so that diagnostic and treatment centers do not cross-subsidize their Medicaid practices with other sources of income meant for the care of uninsured patients. In many states, Medicaid payment levels are so low, even where providers serve large numbers of uninsured low-income patients, that grants meant to help underwrite the cost of caring for the uninsured also must be used to subsidize the cost of care furnished to Medicaid patients.

12 71 Providing Primary Health Care to Children Figure 3 Peekskill Area Health Center Revenue by Funding Source and Financial Class (as a percentage of the total budget) Insurance-type Funding Medicare 7% Self Pay Medicaid 25% 9% Federal Grants 24% Other Grants 35% Grant Funding 1980 Insurance-type Funding Medicare 5% Medicaid 42% Private Insurance 6% Capitation (Medicaid) 2% Self Pay 4% Federal Grants 21% Other Grants 19% Grant Funding 1991 Source: Peekskill Area Health Center, 1037 Main Street, Peekskill, NY

13 72 THE FUTURE OF CHILDREN SUMMER/FALL 1993 Rate Setting In negotiating the cost-based rates for the center, the state establishes a series of allowable cost principles that govern reimbursement for those activities that are part of the covered Medicaid care and services the center provides. For example, in determining how much centers will be paid for prenatal care, the New York methodology payment includes not only the cost of physician and ancillary services but also such activities as outreach, case management, nutritional counseling, social work, and substance abuse risk assessments, preventive health counseling, and other activities that are a part of the center s prenatal care program. If Medicaid did not pay for these activities as part of the cost of prenatal care, they would necessarily be paid for out of grant funds or would not be furnished at all. Families of all income levels and backgrounds may have special needs. At the same time that the New York methodology reimburses centers for an expansive set of primary services, it also builds in certain cost containment features. The rate-setting methodology incorporates upper payment limits for such activities as overhead and administrative services. These reimbursement limitations help assure that the costs which the centers report are reimbursed only to a reasonable degree. Thus, for example, the rate assumes a certain productivity standard and places limits on allowable administrative costs. Rates rise annually but are extrapolated forward in accordance with a reasonable rate of inflation and not in accordance with whatever costs the provider attempts to declare. Occupancy and equipment costs are included, especially those costs approved through the state s certificate of need program. Rates also are adjusted to take into account the greater level and intensity of care needed by certain patients (such as high-risk pregnant women, persons receiving outpatient services for alcohol and substance abuse, patients with HIV, and other high-need patients). The rates also are designed to incorporate the state s expectations about the types of services centers will furnish. For example, prenatal care encounter rates reflect the cost of frequent office visits beginning in the first trimester and assume relatively lengthy encounters (through the use of productivity standards) with the different types of medical and health professionals whose services are important to pregnant women (such as nutritionists, social workers, and case managers). Implications for Other Insurers The New York payment methodology has implications for other insurers. In recognizing primary care costs that go beyond traditional medical care and in reimbursing providers for use of a broad mix of health professionals in a wide variety of settings, the New York system achieves the goals of comprehensiveness and familyappropriateness that, according to experts, characterize effective primary pediatric health care. Low-income children are most commonly perceived as having the greatest need for specially designed primary health care programs. But families of all income levels and backgrounds may have special needs. The simple fact that so many families now consist of one or more parents who work outside the home and have far less flexible lives means that alternative service locations (such as school clinics) may be beneficial for children. Insurance that covers a broad array of primary medical services, health-related care, and family support services is also consistent with the move toward the integration of health financing and health service delivery through prepaid managed care arrangements. (See the article on managed care by Freund and Lewit in this journal issue.) As noted, managed care has intensified the focus on insurance as a prepayment system rather than as a high-risk financing mechanism. Prepayment emphasizes the role of health insurance in assuring the provision of accessible primary health services as a cost containment and health promotion device. Thus, as managed care increasingly shifts health care financing priorities away from highcost, high-risk services and toward primary care, it promotes the consideration of the New York State Medicaid program s payment methodology on a broader scale and

14 Providing Primary Health Care to Children 73 the inclusion of similar payment principles in setting managed care capitation rates. In extending these payment principles to other insurers, several factors should be kept in mind. First, it may be that not all providers should receive similarly enhanced payments. For example, translation and basic case management most likely are not realistic cost factors in affluent suburban communities. Only certain providers will need an added payment factor built into their rate to accommodate these services. If the additional costs of such services are built into all provider payments, there may be a great deal of waste. Second, standards for qualifying for added reimbursement must be carefully articulated. The Peekskill health center, like all federally funded centers, is subject to extensive oversight and regulation in accordance with detailed federal laws and regulations. Thus, the New York Medicaid program has a reasonable assurance that its added payments are being used appropriately. Third, the number of community providers with the talent and skills to adapt their practices to reflect the unique needs of their communities may be limited. Only a portion of community health programs have the capacity or resources needed to develop community practices that are as responsive as those crafted by the Peekskill center. However, the need to develop this capacity to furnish responsive community care is critical, and adequate financing is an essential element of successful adaptation. Moreover, the growth of managed care itself makes funding for practices like the Peekskill Area Health Center especially important. This is because many managed care plans in operation today attempt to limit their exposure to financial risk by avoiding certain patients or health problems altogether, just as insurers traditionally have done. Thus, if risk-based managed care is to work at all as a means of delivering primary health services for higher risk patients, it will be necessary to adapt payment principles to the health care practices that effectively meet the needs of high-risk patients. If insurers that underwrite public or private managed care systems do not finance these adaptation services, then it is likely that cost savings will be achieved not through more aggressive primary health care but through reduced access to services. For this reason, the principles of the New York payment methodology are important ones for managed care plans generally. I would like to thank both Anne Kauffman Nolon of the Peekskill Area Health Center and Paul Tenan of the New York State Health Department for their presentations on the New York Medicaid payment system reviewed in this paper. 1. Starfield, B. Primary care: Concept, evaluation, and policy. New York: Oxford University Press, Children s primary health care use has been shown to be sensitive to cost sharing. In the RAND Health Insurance Experiment, families reimbursed 100% for their children s health expenses spent 33% more on health care than those with a 95% co-insurance plan. Expenditures on ambulatory care for children declined as cost sharing rose, but inpatient hospital expenditures did not vary with cost sharing plans. Leibowitz, A., Duan, N., Keeler, E.B., et al. Effect of cost-sharing on the use of medical services by children: Interim results from a randomized controlled trial. Pediatrics (May 1985) 75,5: Given the complexity of even pediatric health care, it is not surprising that many families might fail to appreciate fully the importance of preventive health care for children, or what is entailed in assuring that their children are adequately protected. For example, fully immunizing a child in the first two years of life now involves 15 separate vaccinations and at least seven separate visits to a health care provider. This fact may be poorly understood by most families. Centers for Disease Control. Protection against viral hepatitis: Recommendations of the Immunization Practices Advisory Committee (ACIP). MMWR 1990, 39,RR2:11. American Academy of Pediatrics. Report of the Committee on Infectious Diseases, d ed., p. 17. Personal communication with Lucy Osborn, M.D., March 24, See also Klerman, L. Nonfinancial barriers to the receipt of medical care. The Future of Children (Winter 1992) 2,2: In 1991, 43.3% of all children lived in families with annual incomes below 200% of the federal poverty level. For these families, the out-of-pocket burden of unsubsidized health services is especially troubling. To give just one example, according to the Centers for Disease Control and Prevention, a full childhood immunization series which cost $20 a decade ago now costs $244, just for the vaccines alone. U.S. Bureau of the Census. Poverty in the

15 74 THE FUTURE OF CHILDREN SUMMER/FALL 1993 United States: Current Population Reports, Series P-60, No Washington, DC: U.S. Government Printing Office, 1992, p. 16. Personal communication with Phil Horne, assistant director of management and operations, Division of Immunization, Centers for Disease Control and Prevention, April 13, More than 67% of children s personal health expenditures (excluding institutional care) in the United States are financed through private health insurance, Medicaid, or other public sources (state and local programs and the Civilian Health and Medical Program of the Uniformed Services [CHAMPUS], the health insurance program for dependents of military personnel). These programs are the primary sources of third-party health care financing for children. Lewit, E.M., and Monheit, A.C. Expenditures on health care for children and pregnant women. The Future of Children (Winter 1992) 2,2: Lewit and Monheit estimate that, of the $49.8 billion spent on personal health care for children in 1987, $21.4 billion was financed through private insurance, $13.4 billion through private out of pocket, $3.0 billion through other private sources (charity, etc.), $6.0 billion through Medicaid, and $6.0 billion through other public sources. 6. Certain forms of primary care, such as immunizations and screening for certain childhood illnesses and conditions, have been shown to be highly cost effective. U.S. Congress, Office of Technology Assessment. Healthy children: Investing in the future. Washington, DC: U.S. Government Printing Office (OTA ), [Only a limited number of interventions fall under this label.] 7. The growing proportion of families with children who live in impoverished and social risk situations intensifies and complicates even apparently routine child health needs. Problems such as adolescent parenthood, growing parenthood among single and low-income women, residence in unsafe communities, and many families limited capacity to address properly their children s social and economic circumstances place added service burdens on the health care system. U.S. National Commission on Children. Beyond rhetoric: A new American agenda for children and families. Final report of the National Commission on Children. Washington, DC: U.S. Government Publishing Office, See also note no. 3, Klerman; Institute of Medicine. Reaching mothers, reaching infants. S.S. Brown, ed. Washington, DC: National Academy Press, For a review of primary services that should be included in pediatric insurance plans, see the article by Budetti and Feinson in this journal issue. 9. See note no. 7, National Commission; Klerman, L. Alive and well?: A research and policy review of health programs for young children. New York: National Center for Children in Poverty, See also note no. 3, Klerman. 10. See note no. 3, Klerman. See also Fossett, J., Perloff, J., Kletke, P., and Peterson, J. Medicaid and access to child health care in Chicago. Journal of Health Politics Policy and Law (Summer 1992) 17,2: Of the estimated 43 million medically underserved Americans in 1989, 78% resided in urban areas and 22% in rural areas. See also, Hawkins, D., and Rosenbaum, S. Lives in the balance: A national, state and county profile of America s medically underserved. Washington, DC: National Association of Community Health Centers, See note no. 10, Hawkins and Rosenbaum. It should be emphasized that the term medically underserved does not necessarily denote patients who lack health insurance. Of the estimated 43 million Americans who can be classified as medically underserved, less than half are completely uninsured. 12. Section 330 of the Public Health Service Act; 42 U.S.C. 254(c) and 254(d) (1992). The Community Health Centers program provides grants to medically underserved communities for the development and operation of clinics furnishing a range of primary and supplemental health services. Migrant health center grants are made for the provision of these services in high migrant impact areas. 13. Title X of the Public Health Service Act; 42 U.S.C. 300a (1992). The Title X program provides grants to high-need communities for the development and operation of family planning programs. 14. Title V of the Social Security Act; 42 U.S.C. 701, et. seq. (1992). The Title V program provides grants to state health agencies for the development of primary health services for low-income and underserved women of childbearing age and children, as well as systems of comprehensive care (including primary health care) for children with special health care needs. While programs assisted with Title V Maternal and Child Health grants predominantly serve low income mothers and children, Title V programs for children with special needs commonly serve children from families of all incomes. 15. Section 314 of the Public Health Service Act; 42 U.S.C. 300(w) (1992). The Preventive Health Services Block Grant provides grants to state health agencies for the development