Much of the cost of bad debt and charity care that is not offset by government subsidies is passed on to insurers and employers in the form of higher charges. By ensuring coverage for every American, the Commission's plan, would virtually eliminate uncompensated care.

2. Reducing the cost shift that now occurs from employers who do not provide insurance to employers who cover their workers and dependents would reduce the per worker cost of health benefits for employers already offering coverage.

Under the current system, employers who provide health benefits are covering an average of one worker employed at another firm for every four of their own workers. 32 To a considerable extent, the burden is shifted from small to large firms because the latter are more likely to provide coverage. Under the Commission's plan, each worker would obtain coverage from his or her own employer, and the dependent children would be more equitably divided among employers.

3. Ensuring small business access to a minimum benefit package at a predictable rate, regardless of employees' health status, would provide affordable insurance coverage for all.

Some practices in the current insurance market make employee coverage unaffordable for many small businesses. A firm may pay higher rates at the outset, or face large increases when it tries to renew coverage, if it has a single potentially costly employee. In addition, administrative costs are higher for small groups than for large ones-in part because the screening out of poor risks in itself entails costs.33 The Commission's insurance reform recommendations would provide equitable rates for all purchasers and would reduce the costs of screening individuals.

Besides the cost control implications of the recommendations the Commission has made so far, the Commission believes that a mechanism is essential to assess, on a continuing basis, the trends in health care costs and the record of efforts to control those costs.

Full implementation of the Commission's recommendations would have dramatic impacts on consumers, providers, and insurers-changing their behavior in ways that may not be entirely predictable before the new systems take effect. At the same time, there would be continuing advances both in medical technology and in our understanding of how to make the best use of that technology.

The impacts of both implementation of the Commission's proposals and of new medical technologies

EARL DOTTER

must be continuously monitored and assessed by the policy process. The Commission recommends that the Prospective Payment Assessment Commission and the Physician Payment Review Commission assess cost experience and initiatives to contain costs in the public and private sectors and make periodic recommendations to Congress on federal initiatives. This expansion of the current charge of these advisory bodies, which now focus mainly on Medicare, is appropriate in light of the expansion of the federal role in the health system contemplated by the Commission-including both the expanded and federalized public plan and the new federal role in ensuring minimum standards in the private health insurance sector.

Access for the Underserved

The Commission recognizes that ensuring universal health care coverage is necessary but not sufficient to guarantee all Americans access to the care they need. Residents of isolated rural areas or inner cities, the poor, minority groups, high-risk pregnant women and their infants, the homeless, the elderly, the mentally ill, the mentally handicapped, individuals with HIV infections, and substance abusers are among the groups for whom a commitment to pay the bills may not be enough to guarantee appropriate care. Many persons fall into more than one of these groups.

High-risk pregnant women and their infants are among the underserved groups targeted to receive special assistance.

Depending on their design, financing reforms can increase the capacity of direct delivery providers. Currently, some organized programs receive less payment from insurers than do other providers offering the same service or are not recognized as providers at all. Eliminating this discrimination and covering patients previously uninsured or underinsured would enable delivery systems to use their state, federal, or private funds to develop additional facilities, to expand types of services and the number of patients served at existing facilities, and to provide additional outreach and case management services. Thus, insurance and service delivery approaches to ensuring access to care can be synergistic.

Several types of subsidized service delivery programs serve those individuals who lack a regular private sector primary care physician. At the federal level, the Bureau of Health Care Delivery and Assistance of the Department of Health and Human Services (HHS) is responsible for programs that bring community-based primary health care to approximately 6 million poor and underserved persons through grants and manpower recruitment. The Indian Health Service (IHS) provides primary care services through a variety of urban and rural programs to more than 1 million persons per year; however, only 1 percent of IHS money pays for care of urban Indians.35 Two federal grant programs (the Maternal and Child Health Services block grant, and the Preventive Health and Health Services block

grant) help support primary care services to underserved populations, usually provided through state and local health departments.

Approximately 25 percent of local health departments have gone beyond offering discrete single health services, and now provide primary care. Hospitals are the only family doctor in many areas, in that underserved persons often rely on hospital emergency rooms or organized outpatient departments as their principal source of primary care. School-based health centers offer primary health care through 150 health centers operating in junior and senior high schools in both urban and rural areas. Finally, the private sector operates nonpublicly funded health centers throughout the country.

A number of studies have shown that existing primary care programs have made significant inroads in reducing barriers to the receipt of appropriate health care, and improving health status and outcomes. For example, the effectiveness of community-based health centers is evidenced by the fact that Medicaid patients who use these centers have lower hospital admission rates, shorter lengths of stay, and make less inappropriate use of emergency rooms than comparable patients who have Medicaid coverage but do not use a community health center. Similarly, health centers have had a beneficial effect on both white and black infant mortality rates, have reduced rheumatic fever and untreated middle ear infections, and have brought about an increase in the number of immunized children. Unfortunately, most of the research in this area was conducted in the 1970s and early 1980s.

The Commission believes that further progress in reaching underserved, vulnerable populations requires availability of a coordinated broad continuum of services. Innovative organized primary care delivery sites now exist that have succeeded in building the needed range of services. The challenge is to facilitate the extension of these successful program models to the other areas in need.

Experience indicates that to be effective, programs targeted at hard-to-serve populations must include several elements.

First, they must make services physically accessible to the population they intend to serve and provide a sufficient number of appropriately trained professionals who are sensitive to cultural, ethnic, and language differences.

Second, they must provide case management, and where possible, colocation of a broad range of health,

welfare, and other support services, including such services as medical referrals, nutrition counseling, income support, food programs, and housing assistance. The Commission recommends that coordination be encouraged by providing federal support for establishing "one-stop shopping programs," and technical assistance to simplify and standardize eligibility requirements and procedures for a multitude of federal and state programs.

Third, effective primary care systems must include outreach and other social services which encourage early entry into the health and social service system and encourage at-risk populations to maintain participation in care. The Commission recommends that federal support be provided to local outreach and facilitating services-preferably linked to health care delivery programs to encourage patients to seek and continue to participate in health care.

Examples of such services include health education. programs, transportation and home visiting, on-site day care, and bilingual services. Strategies to support outreach and other services might include, but are not limited to: (a) providing demonstration grants to enlist volunteers from the community, along with the training and management necessary to ensure appropriate use and retention of volunteers; (b) encouraging communities to provide free or reduced-cost transportation for pregnant women and other high risk, underserved groups; and (c) working with states and localities to promote availability of home visits by public health nurses in underserved areas.

Fourth, although much has recently been learned about what programs are effective in reaching the underserved, more knowledge is urgently needed. The Commission recommends that the federal government support research and evaluation efforts that focus on determining the effectiveness of different primary care models and services aimed at addressing the needs of underserved communities. A crucial part of this effort must be to help local programs set up systems to collect program and monitoring data that allow longterm evaluation as well as short-term feedback.

The Commission believes that efforts to ensure adequate availability of all services require special attention to treatment for problems of alcoholism and drug abuse. Consequently the Commission recommends federal support for a continuum of care-through organized delivery systems and other means-that includes shortterm hospital-based or longer-term community-based alcoholism and other drug treatment services.

Adequate Personnel and Services-Alongside support for primary care delivery systems, the Commis

sion recommends that the federal government should promote an adequate supply and appropriate mix of personnel and facilities for underserved areas and populations, through provider payment methods in public programs that promote availability of primary care practitioners and facilities and ensure access to other needed services, and through special initiatives to attract a range of providers to underserved areas.

The Commission's recommendation that the new public coverage program follow the Medicare program's provider payment methods will significantly improve availability of primary care providers for all segments of the population, especially the currently underserved.

Medicare is in the process of implementing a new method of physician payment-the resource-based relative value scale-that pays national rates (adjusted to reflect differences in local overhead costs) for physician services according to the resources involved in providing those services. The RBRVS fee schedule is designed to correct current financial incentives favoring expensive technology over cognitive physician services. In addition, the national fee schedule should correct current financial disincentives that discourage doctors from practicing in underreimbursed locations. This reform will substantially improve payment for services for primary care (by an estimated 30 percent, on average) and for physicians' practices in rural areas (by an estimated 13 percent, on average). 36 A program of bonus payments to physicians in urban and rural health manpower shortage areas further reinforces these reform objectives.

The Commission regards Medicare's new payment method as critical to ensuring the availability of appropriate care, both in general and in areas now underserved. In extending this payment method for physicians to the recommended federal public coverage program, the Commission intends to promote availability of services under that program and, by providing a model payment mechanism for private payers, for other groups as well.

The Commission also recognizes ongoing refinements in Medicare's prospective payment system for rural hospitals to ensure adequate support for these hospitals and other services in rural areas. Rural hospitals have received larger annual rate increases than urban hospitals over the past three years. Sole community hospital designation has been expanded, along with eligibility for disproportionate share adjustments to hospitals serving high proportions of low-income patients. 37

Other measures have also been taken to further secure services in rural areas. In the Omnibus Budget

Reconciliation Act of 1987, a rural health transition grant program was included that provides federal funding for small, rural hospitals to diversify health services, recruit health care professionals, and improve hospital management in order to improve access to health services for Medicare beneficiaries. 38 Montana is currently undertaking a pilot project establishing Medical Assistance Facilities (MAFs). MAFS are short-stay, low-intensity facilities that provide emergency and inpatient care. MAFS are staffed by a wide range of health care practitioners, such as physician assistants and nurse practitioners. 39

More recently, a new Essential Access Community Hospital (EACH) program was approved by Congress. Under this demonstration grant program, seven states are eligible for federal funding to develop rural health care networks to promote the regionalization of rural health services, improve access, and enhance rural emergency and transportation services.40 It is the Commission's intent that its recommended new public program would incorporate measures developed through these demonstration projects, along with special payment adjustments, to support adequate rural services.

The Commission recognizes that even payment methods designed to pay adequately in underserved areas may be insufficient to attract adequate numbers of providers. Consequently, the Commission recommends further efforts to attract and retain health professionals. Promising strategies include: (a) increased support for programs like the National Health Service Corps and other financial incentive programs; (b) promotion of the appropriate use of mid-level health professionals through development of model state practice acts; (c) further study of problems regarding professional liability; and (d) development of professional support networks, such as telecommunications. networks with other providers to offer adequate backup and support services.

Preventing Illness and Promoting Health

The Commission's commitment to universal coverage in an efficient and effective health care system goes beyond ensuring access to treatment. Preventing the need for treatment safeguards secure, productive lives for all Americans and uses the nation's resources most efficiently.

The Commission recognizes that a higher proportion of low-birthweight babies, higher infant mortality rates, and lower life expectancies than other nations may reflect more than the inability of many Americans to receive needed health care. It may also indi

cate a relative lack of emphasis on early detection and screening for particular conditions, promotion of healthier lifestyles, and more and better education on health-related topics.

The Commission therefore recommends federal support for programs of health promotion, disease prevention, risk reduction, and health education toward the reduction of excess morbidity and mortality and toward the increase of healthy lifestyles. Federal support for such programs should eventually total at least $1.0 billion annually beyond current federal efforts.

IMPROVING PROTECTION FOR PEOPLE 65 AND OVER

The above recommendations apply primarily to Americans under age 65. Nearly all elderly Americans receive their basic health insurance protection from Medicare.41 But gaps in Medicare protection expose the elderly to considerable financial risk.42

To address these gaps in health care coverage for the elderly population, the Commission recommends modifications in coverage in the following three areas:

Protection for the low-income elderly population comparable to protection the Commission recommends for the low-income population under age 65;

• Changes in Medicare benefits for all elderly and disabled beneficiaries, to include preventive services comparable to those the Commission recommends for people under age 65;

• Reforms in the private insurance market that supplements Medicare coverage to ensure adequate protection for the nonpoor elderly that are complementary to the other reforms in private insurance the Commission recommends.

These recommendations would, in combination, benefit 30 million Americans over age 65 at a total new federal cost of $2.8 billion.

Assisting the Low-Income Elderly

For the nonelderly low-income population, the Commission's recommendations call for the newly established federal public plan to subsidize fully all premiums, deductibles, and coinsurance for individuals or families with incomes up to the federal poverty level and provide partial subsidies at least to those with incomes between 100 percent and 200 percent of pov

Commission recommendations fill gaps in Medicare, improving protection for 30 million elderly Americans.

erty. Comparable protection is not currently provided to the low-income elderly population.

Today, there are 3.5 million poor elderly people with incomes below 100 percent of the federal poverty line, roughly $6,000 per year. An additional 8.2 million elderly people are near-poor, with incomes between 100 percent and 200 percent of poverty (see Figure 2-2). Low-income elderly people are more likely to be in poor health and suffer from chronic conditions than higher-income elderly people. In addition, low-income elderly people are less likely than others to have coverage to supplement Medicare. One-third have neither Medicaid nor private insurance and rely solely on Medicare coverage.

Gaps in coverage under Medicare can result in catastrophic out-of-pocket payments for low-income elderly people.

• On average, they spend 14 percent of per capita income on out-of-pocket costs in contrast to 7 percent of income for higher-income people.

The out-of-pocket costs associated with Medicare premium payments ($343 a year in 1990) and routine cost sharing requirements can impose a heavy financial burden on these low-income elderly people.

• At a cost of $500 a year for Medigap policies, protecting against Medicare cost sharing also means severe out of pocket burdens for lowincome people.

• Medicaid buy-in assistance helps by paying the Medicare premium and cost sharing for certain low-income people. But the near-poor will not be helped by the buy-in provisions in current law. Without strong outreach efforts some of the poor will also be left out.

The Commission recommends that Medicare, or the public plan that replaces Medicaid at the federal level, provide assistance with the Medicare premium, deductibles, and cost sharing to all elderly people with incomes below 200 percent of poverty and undertake strong outreach efforts to ensure participation.

The 3.5 million elderly people with incomes below the poverty level (the poor) would be eligible and encouraged to receive full assistance with Medicare premiums, deductibles, and coinsurance from Medicare or the public plan.43

The 8.2 million elderly people with incomes between 100 percent and 200 percent of poverty (the near-poor) would be assisted with payment of premiums, deductibles, and coinsurance on an income-based sliding scale by Medicare or the public plan.