Managing the Safety Net

Hospital Provision of Uncompensated Care in Response to Managed Care

Published in: Advances in Health Economics and Health Research, v. 15, 1995, p. 49-77

Posted on RAND.org on January 01, 1995

by Joyce Mann, Glenn Melnick, Anil Bamezai, Jack Zwanziger

Assesses the effect of increased price competition and stringency in Medi-Cal and Medicare reimbursement levels on uncompensated care delivered by California's hospitals. The data for this study came from the California Office of Statewide Health Planning and Development. Growth in managed care in the private sector is beginning to be matched by similar growth in the public sector. In designing their managed care programs, state governments should take note of the significant number of uninsured who continue to rely on safety net institutions and on private-sector providers' willingness to treat them. This paper provides evidence that managed care-through competition and Medi-Cal contracting-has increased the fiscal pressure on public and teaching hospitals, which have long served as hospitals of last resort, and has eroded the ability of private hospitals to continue to provide uncompensated care. As financing indigent care through cross-subsidies becomes less viable, explicit mechanisms must be developed to ensure the survival of safety-net institutions and continued access for the populations they serve. At the same time, protections must be in place for Medicaid recipients, who cannot opt out of the Medicaid plan into another plan if it fails to provide acceptable levels of quality and access. By developing new mechanisms to create and strengthen private-public partnerships in the delivery of care, states can build upon and improve existing systems.

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