Children's Health: Is Insurance a Panacea?

Children's health is another front-burner issue in the welfare reform debate. Turning up the flame is concern over the millions of children who lack health insurance.

The United States spends about $7 billion a year, or 12.6 percent of the Medicaid budget, on health care for poor children. Since the introduction of Medicaid in 1965, this investment has paid off in lower infant mortality rates and increases in hospitalization rates and doctor visits for poor children. Despite these advances, however, America's children remain in poor health relative to those in other industrialized countries.

At 10 per 1,000, the infant mortality rate in the United States is still the highest in the developed world. Compared with Canadian children, American kids are sicker, with 28 percent more disability days and 44 percent more bed days. Mortality rates of American children are also much higher than in Canada--14 percent higher for infants and 8 percent higher for children one to four years of age. There are also dramatic racial differences in health and the use of health care services. The infant mortality rate among African Americans is double that among whites and, in some states, rivals the mortality rates of developing countries. All of this suggests that poor children in this country, particularly poor black children, are not receiving the same quantity or quality of health care as children in other wealthy countries.

Many concerned observers blame this disparity on the rising number of children who are not covered by insurance--in 1995, 9.8 million children, almost 14 percent of children under 18, were uninsured for the entire year, according to the U.S. Bureau of the Census. President Clinton is reported to be considering a $750-million-a-year program to help extend insurance to "gap kids."

Poor children, especially poor black children, are not getting the same quantity or quality of care as children in other wealthy nations.

But would extending medical coverage to all children solve the problem? The RAND/UCLA research team of Currie and Thomas investigated the issue. Using a large national database, they compared the medical care received by children covered by Medicaid, by private health insurance, and those with no insurance coverage at all.

Insurance Effects Differ by Race

"If high rates of sickness and death are solely the result of an inability to pay for care," they write, "we would expect to find that Medicaid coverage has the same effect on the use of care as private insurance coverage, and that white and African American children with similar insurance coverage have similar rates of use."

Despite the advances, a poor health report.

Instead they found that private health insurance and Medicaid are not interchangeable in their effects on the medical care of children, and that racial differences in the use of care persist regardless of family income and type of insurance coverage. Based on two measures of care--routine checkups and visits to the doctor for illness--the researchers found that

Medicaid-covered children in general are more likely to have routine preventive checkups than children with private insurance or no insurance at all. However, white children covered by Medicaid get more attention from the health care system--both more routine checkups and more doctor visits for illness--than children of other races, even if those children are covered by private insurance.
For black children, neither Medicaid nor private insurance coverage is associated with an increase in the number of visits to the doctor for illness. Moreover, black children with private insurance are no more likely to have routine checkups than children without coverage.
These differences in levels of care of black children and white children persist across income levels. That is, regardless of type of insurance coverage or lack of it, poor black children see a doctor less often than poor white children, and middle-class black children less often than middle-class white children.

If lack of insurance is not the culprit in the unequal care of black children, what is? The researchers' data could not help them answer that question, but drawing on evidence from other studies, they suggest an alternative explanation: Because of residential segregation, black children may lack access to providers of quality care. Studies have found that areas with a large residential concentration of Medicaid patients have fewer doctors willing to serve them. In addition, doctors with a high share of black patients may provide lower-quality care. Black children are twice as likely as white children to receive care in a clinic or emergency room rather than from a private provider, health maintenance organization (HMO), or group practice.

Coverage is not, in itself, a guarantee that the children who most need care will get it.

Other factors not bearing on racial differences help to explain why the poor need more than insurance coverage as their passport to the health care system. Many states limit the services available to Medicaid patients; for instance, in 1986, Texas did not cover clinic services, Connecticut did not cover emergency services and New Hampshire restricted Medicaid patients to 12 outpatient visits per year. Finally, bureaucratic delays may pose a significant barrier to timely care--the average delay in processing Medicaid applications is four weeks.

The message of this study is that expanding health insurance coverage is likely to yield substantial benefits in terms of improved health for children. But expanding Medicaid is not, in itself, the solution that will assure that those who most need health care will get it.[1]

Poor Children and HMOs

Recently, Congress has been pondering legislation that would channel poor people on Medicaid into HMOs as a way of curbing costs without creating new health care barriers for the poor.

But a big question mark hovers over how HMOs achieve their vaunted efficiencies. Do they hold down costs by eliminating only unnecessary care or do they scrimp on needed care as well, cutting services indiscriminately? The answer is particularly important as it affects poor children, one of the largest and most vulnerable segments of the population.

To find out, economist Leibowitz and her colleagues examined how medical care obtained by children in one HMO differed from that obtained from traditional physicians in fee-for-service practice.

The results of the study were encouraging: Children in both the fee-for-service and prepaid (HMO) plan had roughly the same number of routine doctor checkups, but children in the HMO had significantly fewer visits for illness.

This does not mean that children in the HMO were getting too little care, the researchers said. On the contrary; because the reduction in acute care visits was concentrated in a particular group--children with no health problems at the start of the experiment--it suggests that the HMO is doing a good job of targeting resources on kids with the greatest health care needs rather than merely rationing services across the board.

"Medical Care for Children: Public Insurance, Private Insurance and Racial Differences in Utilization," Janet Currie, and Duncan Thomas, The Journal of Human Resources, Vol. 30, No. 1, Winter 1995, pp. 135-162 (RAND reprint, RP-397, no charge).
"Rationing or Rationalizing Children's Medical Care: Comparison of a Medicaid HMO with Fee-for-Service Care," Arleen Leibowitz, Jane Mauldon, Joan L. Buchanan, Cheryl Damberg, and Kimberly A. McGuigan, American Journal of Public Health, Vol. 84, No. 6, June 1994, pp. 899-904 (RAND reprint, RP-353, no charge).

Funding for the studies described in this and the previous article was provided by the National Science Foundation, the Alfred P. Sloan Foundation, the Office of the Secretary of Defense, the National Institute of Child Health and Human Development, The Robert Wood Johnson Foundation, the Health Care Financing Administration, and the National Governors Association.

[1] Other RAND studies bear on the question of expanding Medicaid coverage for poor children and their mothers. See the bibliography in this issue for studies by Currie and Gruber and by Halfon et al.

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