Going backward into the future: the struggle for equality in medical treatment continues into the 21st century. How can we end it?

Healthcare Financial Management, Sept, 2005 by David Barton Smith

July 30, 2005, marked the 40th anniversary of the Medicare and Medicaid legislation. In addition to greatly expanding the financing of care for the elderly and indigent, that legislation forced the end to blatant forms of racial segregation and discrimination in treatment. Within a few months of its passage, almost 1,000 hospitals and medical staffs were desegregated and blacks in all regions of the country began to receive access to medical services on an equal footing with whites. Yet even at the 40th anniversary of that legislation, the struggle for equal treatment continues. Racial and ethnic disparities in treatment persist, and current shifts in the financing of care threaten to reverse earlier successes. A broad based professional and bipartisan movement has only just begun to emerge committed to doing whatever is necessary to eliminate the remaining racial and ethnic disparities in treatment. In ensuring equal treatment, we are at a crossroads.

The Institute of Medicine's recent extensive review concluded that racial and ethnic minority patients receive a lower quality and intensity of health care and diagnostic services across a wide range of procedures and disease areas. (a) Only a handful of the more than 200 studies reviewed by the IOM committee found no differences in care. Although studies that controlled for income and insurance status attenuated these disparities, they rarely disappeared altogether. The disparities are particularly evident with respect to cardiovascular care. Blacks show a greater prevalence of heart disease and higher cardiovascular death rates, yet they are less likely to receive diagnostic workups and treatment. Although some of these differences reflect overuse of services by whites, blacks die and have their health adversely affected because of not receiving equally timely and appropriate services.

The fundamental lesson that should have been learned from the implementation of the Medicare program is that if you want to eliminate disparities in treatment, you have to align the financial incentives with that goal. As Mark Felt (alias Deep Throat) suggested more than three decades ago, you have to follow the money. While many factors shape disparities in treatment, the way patients share the cost and the way providers are paid have by far the largest impact. If people lack insurance or if copayments and deductibles are high enough, patients, particularly those with low or moderate incomes, will use less care. On the supply side, providers will expand services that are profitable and contract services that are unprofitable. The more profitable the services are, the more they will expand, and the less profitable they are, the more they will contract. Healthcare financial managers know how this works in deciding which geographic areas and which services to invest in. In the words of another icon of the civil rights and Vietnam War era, Bob Dylan, "money doesn't talk, it swears."

The Medicare program in its earlier years knew how to swear in a way that would break down barriers to access. Medicare offered generous cost-based payment to those willing to comply with the conditions for participation. All the hospitals had to do was to eliminate segregated accommodations and open their medical staff to qualified minority physicians. Hospitals had little trouble assessing the impact on their bottom line. Once the reds made it clear they were serious about making these requirements a condition for participation, all but a handful of hospitals across the nation made the necessary accommodations in the three months prior to the implementation of the Medicare program. Faced with the choice of financial ruin or robust financial health, few managers or boards had trouble deciding to comply with these requirements. The Medicare and Medicaid programs in their first decade made expanding services to previously underserved populations profitable and risk free.

The first decade of the Medicare and Medicaid program demonstrated the remarkable success of these new financial incentives in eliminating gross disparities in access to medical services. Following the money, providers expanded services to those who previously had been underserved. In 1964, blacks were, age adjusted, only 77 percent as likely to see a physician and only 75 percent as likely to be admitted to a hospital. In 1975, they were 96 percent as likely to see a physician and 118 percent as likely to be admitted to a hospital. (b) The change in access during this period was even more dramatic for low-income persons regardless of race when compared with higher income persons.

Within the Medicare program, the effect of these financial incentives over time in eliminating disparities in investment in care was even more remarkable. In 1967, the first full year of operation of the Medicare program, nonwhite inpatient hospital expenditures per enrollee were only 74 percent of white expenditures and physician expenditures were only 60 percent of white expenditures. By 1995, all of these disparities in expenditures had been eliminated, and nonwhite enrollees were receiving 21 percent higher inpatient hospital expenditures per beneficiary than whites and 13 percent higher physician expenditures. (c) The lower use of health services by minorities and the poor had always been considered an irreversible fact of life in health care in the United States, and the change was revolutionary. Of course, not all disparities had been eliminated given the generally poorer health of the nonwhite population. Those disparities in access to specialized services, as documented by the Institute of Medicine's recent review, persist.