Health care markets, the safety net, and utilization of care among the uninsured

Health Services Research, Feb, 2007 by Carole Roan Gresenz, Jeannette Rogowski, Jose J. Escarce

Over the past 15 years, roughly one in seven individuals in the U.S. (between 13.6 and 16.3 percent of the population) have been uninsured (U.S. Census Bureau 2004). For many of the uninsured, access to health care is heavily dependent on a "safety net" of providers (Hadley and Holahan 2003; Lewin and Altman 2000). Such providers include traditional safety net providers--those who are legally obligated to provide care to persons who cannot afford it, such as public hospitals, federally funded community health centers, and local health departments--and mainstream providers--those who provide uncompensated care voluntarily or as part of their community-service obligation.

Previous research has documented wide variation in access to medical care among uninsured individuals living in different communities (Cunningham and Kemper 1998) and various studies have linked these access differences to variation across areas in managed care penetration, the percent of the local population that is uninsured, safety net capacity, and the location of safety net providers (Cunningham 1999; Long and Marquis 1999; Hadley and Cunningham 2004a, b; Cunningham and Hadley 2004).

This research further explores the relationships between local health care market and safety net characteristics and utilization of care among the uninsured. It extends previous research in several important ways. First, with nationally representative data including a large sample of more than 8,000 uninsured individuals, created by pooling multiple panels of respondents from a longitudinal survey, we are able to separately analyze uninsured individuals living in rural (nonmetropolitan) and urban (metropolitan) areas. Second, our data allow us to include a comprehensive set of individual-level health status measures which alleviate the potential impact of endogeneity related to health status that may otherwise bias results. Third, we analyze both safety net and health care market characteristics, providing the most comprehensive look at the relationship between these factors and use of care among the uninsured to date.

CONCEPTUAL FRAMEWORK AND HYPOTHESES

Economic models of the demand for medical care suggest that utilization of health services depends on how much an individual values health care and the price of health care relative to other goods. Individuals' valuation of (or "taste" for) health care is unobservable, but we proxy for taste with individual characteristics such health status, income, age, race, and gender. Components of the price of health care include the out-of-pocket costs associated with receiving care, search costs associated with finding a provider, time and transportation costs of getting to the care provider, and the cost of time to actually receive care (e.g., waiting time, visit time). For low-income individuals, these costs--especially time costs--may strongly influence the utilization of medical care (Acton 1976).

Characteristics of the local safety net and health care market are likely to be important determinants of the costs of obtaining care for the uninsured. An uninsured individual's location relative to safety net providers affects the time and transportation costs associated with obtaining care. Our expectation is that that travel costs increase with distance, and that the farther individuals live from safety net providers, the lower will be utilization. Further, the costs of care for the uninsured are likely to be lower the greater are the resources, and in turn the capacity, of safety net providers. More resource-rich providers are likely to be able to offer more convenient hours and more immediate care, reducing, for example, waiting times at the place of care and the costs of time off from work an uninsured individual might have to incur to obtain care.

Other dimensions of the health care market are also likely to influence the price of care for the uninsured, and in particular, the out-of-pocket costs that uninsured individuals must pay for care. A greater presence of managed care may result in lower prices paid to mainstream providers for the services they provide to insured patients and limit their ability to cross-subsidize free or discounted care for the uninsured. On the other hand, competition among managed care plans may erode plans' bargaining power, blunting their influence over prices. Thus, in competitive managed care markets, providers may be able to negotiate higher prices that enable them to subsidize discounted care for the uninsured, other things equal. Furthermore, uninsured individuals living in areas where a relatively large fraction of the population is uninsured may have to compete for limited health care resources, which may drive the out-of-pocket price of care up or be associated with longer waiting times for care. Thus, health care utilization may be lower in these areas for any given uninsured individual (IOM 2003).

Finally, we expect that a greater local supply of primary care doctors will reduce search costs associated with finding a provider, and in particular one who provides free or discounted care.