Vernellia R. Randall
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| V. Healthcare Financing
excerpted Wrom: LPTCXLYRWTQTIPWIGYOKSTTZRCLBDXRQBGJSNB Equitable Health Systems: Cultural and Structural Issues for Latino Elders, 29 American Journal of Law and Medicine 247-267 (2003) (159 Footnotes Omitted) The third key area identified by the WHO and OECD as an equity issue is medical care financing. Fairness in financing occurs to the extent that individuals pay for medical care based on their ability to pay rather than their medical needs. Large and unexpected medical care costs affect a small proportion of the population, but most disease is not easily predictable at the individual level. Health insurance that involves financial risk sharing and prepayment addresses the problem of devastating medical costs. Also, out-of- pocket costs are often regressively financed, with the degree of regression based on the amount a person pays for medical care (including insurance premiums) as a percent of their discretionary income. Latino elderly are more likely to have no insurance than non-Latino white elderly (about 5% versus 1%), which might place this small group at risk for potentially catastrophic medical care expenses. If these uninsured elders are permanent U.S. residents, however, they are eligible in most states for Medicaid if they have almost no assets and very low incomes or have medical expenses that leave their remaining income low enough. Being underinsured is a more significant problem then being uninsured for the elderly. As noted in the discussion of accessibility, Medicare has a number of uncovered services in addition to copayments and deductibles. These costs lead many elders to obtain supplemental coverage that pays for costs such as deductibles and, sometimes, prescriptions; private policies are generically called "Medigap" insurance. Table 2 infra shows how supplemental insurance varies by race and ethnicity. In 1999, HMO coverage was most common for Latino elders, in part because they are more likely to reside in states with high rates of Medicare HMO coverage (California and Florida), and in part because HMOs often provide coverage for prescription medications along with low copayments and no deductibles, which is particularly attractive to low-income populations. Latino elderly are also highly dependent on Medicaid to supplement their Medicare coverage (Table 2). Medicaid is important supplemental coverage because it covers prescription medications in addition to covering the copayments, deductibles and premiums required by Medicare. Non-Latino whites are the most likely to have private supplemental insurance overall and over half of them have it provided by former employers (typically at little or no direct cost to the recipient). This supplemental insurance usually covers many of the expenses Medicare does not completely cover. Older Latinos have a much higher rate of having no supplemental insurance than non-Latino whites, reporting neither private insurance nor Medicaid (Table 2), and therefore have the greatest exposure to out-of-pocket costs, even though they often have limited incomes. We can infer the equity consequences of this pattern of health insurance for the elderly from studies of the out-of-pocket medical expenses for elders with each type of coverage. Overall, elderly people with incomes below poverty spend approximately 30-35% of their income on medical care services and premiums compared to 10% for families with incomes above 400% of poverty. Elders with only Medicare who were not living in nursing homes and had no supplemental insurance spent an average of 23% of their total income on medical care expenses in 1995. The percentage would have been even higher if it was based only on discretionary income. By comparison, elders who also have employer-sponsored private supplemental insurance pay 16.1% of their incomes for medical expenses. These out-of-pocket expenses are also distributed differently by insurance type, with Medicare-only elderly spending one-third the amount on dental care (which is not covered by Medicare) as those with private supplemental insurance or Medicare HMO coverage. The pattern of out-of-pocket spending suggests that the inequity in financing of healthcare forces elders with only Medicare to spend more of their personal resources on hospital and outpatient services, leaving fewer resources for other heath needs such as dental care. Those with supplemental insurance who are insured against Medicare's copayments and deductibles can devote a greater proportion of their healthcare dollar to dental and other important needs. While the analysis of equity of financing healthcare for Latino elderly has been inferential because of the lack of Latino-specific data, their higher rates of Medicare-only insurance and lower incomes suggest that they are spending a larger proportion of their discretionary incomes on medical care than older non-Latino whites. In addition to being inequitable, older Latinos may also have had to divert funds that might have been spent on other needed care to be able to pay for essential hospital and outpatient care.
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