The delivery of appropriate health services to the indigent and the efficient use of local resources to coordinate care generally have eluded both public and private solutions.
Meaningful incentives for all the players-local, state and federal governments; hospitals; physicians; service users; and potential investors-have not been part of Medicaid programs or local welfare systems. The provision of care to the needy has been viewed as an obligation or burden that wouldn't interest investors, save for the recent attraction to for-profit Medicaid HMOs.
The bond financing model for indigent/uncompensated care suggests that essential social infrastructure issues, such as health services, may be treated in a fashion similar to roads, bridges, sewers and industrial development parks. They are essential investments in the health and welfare of the community, involving sizable cash flows, deployment of considerable capital and working capital resources.
They also have measurable processes and outcomes associated with their use, such as improved pregnancy outcomes, reduced use of expensive hospital and emergency room services, and managed use of appropriate, less costly community health services.
The model calls for issuance of tax-exempt bonds that will serve, in part, as a source of funds to underwrite certain capital and operating needs of all healthcare providers in a community, including physicians, clinics, hospitals and others.
These funds would be pooled with existing state and local funds, including Medicaid monies, and used to pay for a carefully managed combination of loans made to providers for specified uses and for provision of managed care to medically indigent members of the community.
That population could include employees of small business who may be able to "buy into" the fund with reduced premium equivalent dollars.
The model includes the following elements:
Issue tax-exempt bonds.
Place the bond proceeds into a capital/working capital pool, an indigent-care payment pool and an investment pool.
Combine existing Medicaid and local government health subsidies, and centrally administer all unfunded/indigent care.
Issue loans, based on pre-established criteria, to qualified healthcare providers for purposes of relatively small (i.e. less than $5 million) capital projects-particularly those associated with managed-care system/alternative delivery system needs, with interest discounts based on volume or proportion of indigent/
uncompensated care provided.
Allow employed but uninsured people to buy into the system at premiums scaled to incomes.
Invest a portion of the initial bond proceeds, and continue to invest repayments made to the capital/working capital pool funds.
Contract with healthcare providers, preferably on a capitated basis, to provide healthcare services to the medically indigent in their service areas.
Place all medically indigent and uninsured into managed-care systems.
Require "fail-safe" systems of beneficiary identification and records management to reduce use of services by nonqualified users. For example, require beneficiaries to carry ID cards with photos, basic information and a computer chip with some clinical data.
Refinance bonds as markets change, pay interest and principal to investors, and issue new bonds periodically.
Mandatory participation of the medically indigent would, in my opinion, be an essential element of this program-especially since the Medicaid population would be rolled into the plan, and the emphasis will be on channeling all these groups into well-controlled managed care.
We have been gently forcing Medicaid recipients in Florida to join managed care, and it is clear that the proposed MediGrant program before Congress will do more to require mandatory participation.
The concept reflects some of the Hill-Burton principles, in that interest rates will be tied to volume (or perhaps relative proportion) of at-risk populations served or enrolled.
The idea is not much counter to other laws or regulations-though it would require waivers from HCFA and the Internal Revenue Service for a demonstration period.
Providers would find the program appealing because they could gain access to relatively low-cost capital and working capital. All providers-including physicians, groups, clinics, hospitals, public, private, not-for-profit and investor-owned-would be eligible for these funds. They would also get paid for the care they provide.
When this idea was introduced, I argued that even Humana would find it appealing because they would be paid a fair-market capitation rate for all medically indigent people, including Medicaid.
The rush, in recent years, by for-profit Medicaid HMOs to cull market share is testimony to the willingness of investor-owned healthcare organizations to see medically indigent clients if they are paid to do so.
I am increasingly concerned about the gross profits enjoyed by Medicaid HMOs in Florida, both in the sale of their assets and in the operating margins that have made them so popular. If HMOs were to participate in this program, I would favor aggressive restrictions on their profitability. The revenues derive from public sources, so the state can be said to have a compelling interest.
