Financing Healthcare Services within the State of Georgia

Appropriate funding of healthcare services affects not only accessibility but also quality of services rendered. This report provides recommendations for funding ambulatory services, continuum of long-term care services, and mental and behavioral services in the state of Georgia

Funding Ambulatory Services

Increasing use of ambulatory services has resulted from challenges in financing healthcare that have necessitated a shift from in-patient to outpatient management of illness.  However, as Morris (2012) observes, having patients pay significant amounts for their outpatient visit from out-pocket arrangement may lead to significant dropout from treatment. As Decker (2009) also reports, reduction in the level of funding to ambulatory services by Medicaid leads to the shift towards more utilization of inpatient services, which bears higher cost implications. As such, and as observed by a MedPac (1999) report to the congress, public insurance options have a significant role in ensuring a shift to ambulatory care, which, eventually leads to long-term cost savings when compared to inpatient care.

The recommendations for financing ambulatory services in Georgia would thus be to combine public and private insurance options to enhance utilization of ambulatory services as compared to inpatient care. For public insurance, Medicare needs restructuring to enhance co-payment services that may help avoid moral hazard among the beneficiaries and providers. For co-payment to act as a moral hazard deterrent, however, an effective balance between level of co-payment needed to arrest unnecessary visits and level that may deter necessary visits needs to be established.  For instance, although earlier studies conducted in the US (Cherkin, Grothaus, & Wagner, 1990 and Scitovsky & McCall, 1977, as cited in Schreyogg & Grabka, 2010, p.332) showed that per-visit co-payments reduced physician visits, the study by Schreyogg and Grabka (2010) found that a single co-payment within a defined period may not deter visits to the physician.  On the other hand, as Morris (2012) observes, high co-payments may lead to patients not seeking care even when necessary, which would lead to progression of illness to levels that would need more funds to address. As such, a well-structured co-payment approach, which accounts for levels of individual income and health risk, can enhance coverage not only by public sector systems, but also by private insurers (Kumar, Ghildayal, & Shah, 2011). In effect, this would help enhance utilization of ambulatory services compared to inpatient services thus lessening the overall cost of healthcare in the state in the long term.

Funding Long-Term Care Services

Effective funding of long-term care is necessary especially with the changing demographics, not only in Georgia, but also in the US and other developed countries. Aging of the baby boomers population and better healthcare services that have lengthened life expectancy imply that more people will be in need of long-term care services in the near future (Moon, 2011; Wiener, 2011; Roberts, Miller & Hokenstand, 2012). However, traditional public funded programs such as Medicare and Medicaid that fund up to 97% health care needs of the elderly have increasingly faced a threat with the pressure to cut Federal and state expenditures (Moon, 2011, p. 298-299).  Such pressure may imply the need to transfer the funding by Medicare and Medicaid to alternative options, especially with a recent report indicating that Georgia would be among the states whose health care cost would increase significantly on adopting Patient Protection and Affordable Care Act’s (ACA)  recommendation to expand Medicaid coverage (Kaiser Family Foundation, 2012). Nevertheless, funding long-term care via private options is not a feasible alternative since private insurers are likely to agree only to high premiums based on significant risk of illness during old age.

One of the alternatives to supplement Medicaid has been argued to be employer-sponsored plans. In recent years however, employers have increasingly reduced retirement coverage in cost cutting measures and adopting such an approach would leave a lot of the elderly uncovered (Moon, 2011). Similarly, other Medigap insurance options (either employer or individual private insurance arrangements) are reported to lead to a higher financial burden and lower quality of care to the beneficiary compared to Medicare and Medicaid alternatives (Moon, 2011). Although private options organized in the form of Health Maintenance organizations (HMOs) offered better prices than Medigap in their initial stages, subsequent legislation made them unaffordable due to increased premiums and high cost sharing requirements (Moon, 2011).  As such, with lowered incomes during retirement, such plans become unfeasible to cater for long-term care. A recommendation would thus be to have beneficiaries contribute more to the cost of the care within the Medicare plan. For Medicaid, requiring beneficiaries to contribute more may be counterproductive since Medicaid mainly targets low-income, and already requires beneficiaries to devote a substantial amount of their income to institutionalization costs (Moon, 2011). As such, increased revenues for Medicaid to fund increased participation as more population qualifies will likely have to come from taxation, for instance, an income tax component based on individual average risk and years-to-retirement age (Frank, 2013).

Funding Mental and Behavioral Services

Historical stigmatization of mental disorders has prevented advancement in financing alternatives as opposed to financing for physical disorders. As evident in Kroncke and White’s   (2009) argument, the perception that inclusion of mental health disorders in public funded insurance programs has facilitated the increase in health care costs still prevails. Nevertheless, observations that as much as 20 percent of the US population suffers from diagnosable mental disorders, and only 37 percent of these receive treatment (Carpenter, 2005), have necessitated development of better financing approaches.

The recommendation for funding of mental health services for the state of Georgia is to employ managed care approaches.  For example, such an approach would encourage the use of low-cost providers, which would be appropriate for less severe cases (Carpenter, 2005). As Kapphahn, Morreale, Rickert and Walker (2006) observe, private insurance plans and employer-sponsored insurance have often left out mental health services from the health insurance policies they develop. Such a case has led to most people relying on Medicaid and, for children, State Children’s Health Insurance Program (SCHIP) to access mental health services (Kapphahn et al., 2006, p. 322). Such use of managed care would encourage the participation of private insurance players in the provision of mental health insurance (Carpenter, 2005), thus easing the burden on public insurance plans that have faced increased threats with need for federal and state expenditure containment. Although the quality of services under managed care receives a lot of criticism (e.g. Kapphahn et al., 2006), they may be the only feasible approach to expand care to many underserved populations by enhancing affordability.

 

References

Carpenter, C. E. (2005). Financing mental health care. Journal of Financial Service Professionals, 59(6), 32-34.

Decker, S. L. (2009).  Changes in Medicaid physician fees and patterns of ambulatory care. Inquiry, 46, 291-304.

Frank, J. A. (2013). W(h)ither Medicaid. NAELA Journal, 9(1), 67-89. Accession #: 87314054

Kaiser Family Foundation (2012). The cost and coverage implications of the ACA Medicaid expansion:  National and state-by-state analysis. Retrieved from http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8384.pdf

Kumar, S., Ghildayal, N. S., & Shah, R. N. (2011). Examining quality and efficiency of the US healthcare system. International Journal of Healthcare Quality Assurance, 24(5), 366-388. DOI:10.1108/09526861111139197

Kapphahn, C., Morreale, M., Rickert, V. I., & Walker, L. (2006). Financing mental health services for adolescents: A background paper. Journal of Adolescent Health, 39, 318-327. doi:10.1016/j.jadohealth.2006.06.002

Kroncke, C., & White, R. F. (2009). The modern health care maze: Development and effects of the four-party system. Independent Review, 14(1), 45-70.

MedPac (1999). Changing Medicare’s payment systems for ambulatory care services. In  Report to the congress: Medicare payment policy (101-114). Retrieved from http://www.medpac.gov/publications%5Ccongressional_reports%5CMar99%20Ch6.pdf

Moon, M. (2011). Organization and financing of health care. In R. H. Binstock & L. K. George (Eds.), Handbook of Aging and the Social Sciences (Seventh Edition) (295-307). San Diego, CA: Elsevier Inc. DOI:10.1016/B978-0-12-380880-6.00021-6

Morris, R. (2012). Using third-party financing to help today’s patient pay for treatment and care.  Journal of Medical Practice Management, 27(4), 189-191.

Roberts, A. R., Miller, D. B., & Hokenstad, M. C. (2012). Long term care insurance beyond the CLASS program. Journal of Sociology & Social Welfare, 39(3), 85-109.

Schreyogg, J. & Grabka, M. M. (2010). Copayments for ambulatory care in Germany: A natural experiment using a difference-in-difference approach. European Journal of Health Economics, 11, 331-341. DOI:10.1007/s10198-009-0179-9

Wiener, J. M. (2011).  Long-term care financing, service delivery, and quality assurance: The international experience. In R. H. Binstock & L. K. George (Eds.), Handbook of Aging and the Social Sciences (Seventh Edition) (309-322). San Diego, CA: Elsevier Inc. DOI:10.1016/B978-0-12-380880-6.00022-8

 

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