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CRC Memorandum

  No. 1061 A publication of the Citizens Research Council of Michigan June 2002  

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Second in a series of papers on Public Policy Issues in the Financing of Michigan Hospitals
This series was made possible by grants from the W.K. Kellogg Foundation and the Hudson-Webber Foundation

HEALTH INSURANCE COVERAGE AND UNINSURED/
UNCOMPENSATED CARE IN MICHIGAN HOSPITALS

In Brief

  • The percent of Michigan residents without health insurance (including both private and governmental) for an entire year has been below the national average every year since 1987 with the greatest difference in 1988 (5.5 percent in Michigan vs. 12.2 percent U.S.) and the least difference in 1998 (15.1 percent vs. 11.5 percent)
  • The highest percentage of uninsured occurred in 1998 near the height of the 1990's economic boom.
  • The number of Michigan residents without health insurance decreased each year from 1998 through 2000.
  • In 2000, 72.7 percent of those with insurance in Michigan were covered through an employer-based plan compared with 64.1 percent nationwide.
  • Michigan hospitals reported charges of $1.1 billion for uninsured and uncompensated care in 2000 with associated costs of $456.2 million after accounting for recoveries, offsets and private payment receipts.
  • Of the 150 hospitals, 129 showed losses from uninsured and uncompensated care in amounts ranging from $48.6 million to $1,967 million. Ten hospitals reported no cost and 12 hospitals showed positive income as receipts exceeded costs.

 

Health Insurance Coverage

While the majority of persons in Michigan and the United States have health insurance coverage, the number of those who do not is significant. Some 38.7 million persons nationwide (14.0 percent) and 1.0 million in Michigan (9.8 percent) were without health coverage for the entire 2000 calendar year. Largely due to Medicare, only about 1-2 percent of persons aged 65 and older are not covered by private or public health insurance. New special programs directed towards persons less than 18 year of age such as Health Kids and MIChild are expected to reduce the percent of uninsured youth and children from the estimated 9.7 percent level reported for 1999.

Since the Census Bureau began collecting data as a part of the Current Population Survey in 1987, the national trend has been an increase in the percent of the population without health insurance. This was reversed in the country as a whole for the first time between 1999 and 2000. The Michigan experience has been more varied with the percent of uninsured decreasing in 6 of the year-to-year periods and increasing in 6. The percent of uninsured in Michigan has been less than the national average in each year. Table 1 shows coverage since 1987.

While the number of uninsured has generally increased between 1987 and 2000, so has the number with insurance. Until 1998, as the population has grown, the number of people with and without insurance has increased. In Michigan, those with health insurance have increased every year since 1992 while those without insurance have both risen and fallen during the same period - the highest number occurring in 1998 at 1.1 million.

Table 1, Number and Percent of U.S. and Michigan Residents With
and Without Health Insurance for the Entire Calendar Year

Who Pays for Health Insurance?

Governmental health insurance programs (Medicare, Medicaid and Military) cover about 11-13 percent of the Michigan and U.S. population while private insurance covers some 72 percent nationally and 79 percent in Michigan. Included in the private insurance figures are governmental employees whose insurance is paid for by government but administered through private insurers and certain select groups such as prisoners who may also be provided insurance through a private insurer or through managed care organizations.

Table 2, Type of Health Insurance Coverage for United States
and Michigan Population: Calendar Year 2000

Coverage Trends

Most authors of articles on health insurance coverage make particular note of the fact that the percent of those without health insurance did not decline during the economic boom of the 1990s. An article in the November/December 2001 Health Affairs (Calm Before the Storm: Expected Increase in the Number of Uninsured Americans, pp. 207-210) uses regression analysis to indicate that the reason for this was that the rate of growth in health spending was approximately equal to the rate of growth in personal income during this period. Current data shows health-spending growth is rising and personal income growth is declining which would predict a growing number of uninsured.

 

About the Michigan Data

The following tables, charts and analyses are based on information filed for two recent fiscal years. Cost and Indigent Volume reports were filed for 170 hospitals for the periods in this report: 20 of which are not included.

Hospitals Not Included in the Memorandum

Psychiatric Hospitals:

  • Aurora Healthcare, Inc.
  • Forest View Psychiatric Hospital
  • Harbor Oaks Hospital
  • Havenwyck Hospital
  • Kingswood Psychiatric Hospital
  • Pine Rest Christian Hospital

Hospitals Without Some Data Available for Both Years:

  • Addison Community Hospital Authority
  • Baraga County Memorial Hospital
  • Kindred Hospital - Detroit
  • Kindred Hospital - Metro Detroit
  • Lakeland Specialty Hospital at Berrien Center
  • Select Specialty Hospital - Macomb County
  • Select Specialty Hospital - Flint
  • Select Specialty Hospital - Western Michigan

Hospitals that Closed Between 1998 & 2000:

  • Arborview Hospital (Closed 4/30/00)
  • C.C.S./Lansing, Inc. (Closed 11/19/99)
  • Greater Detroit Hospital - Medical Center, Inc. (Closed 12/31/99)
  • Morenci Area Hospital (Closed 12/31/97)
  • Oakwood Downriver Medical Center (Closed 12/31/99)
  • Renaissance Hospital & Medical Centers (closed 7/1/99)

The 2000 data is for the period October 1, 1999 through September 30, 2000. Hospital fiscal years end at different times (most are either December 31 or June 30) so that the impact of a particular federal or state policy change or reimbursement alteration or change in economic climate can be reflected unevenly in the data of different hospitals.

Uninsured charges are divided into three categories: charity, patient pay and state or local programs. The charity designation indicates that the hospital did not bill for the service and treated the costs as charity from the time of service. Uninsured patient pay represents charges for care given to persons without insurance who are billed for the care but who may or may not fully pay for it. Charges for persons covered by a state or local program, such as state prisoners receiving surgery at a local hospital, are reported separately as uninsured.

Some hospitals have a policy to bill for all care. Care that another hospital might categorize as charity is thus reported as an uninsured patient pay amount. This memorandum combines the three categories.

Hospitals also report charges for services to insured persons that are not fully paid. These are called uncompensated and often consist of unpaid deductibles and co-payments for both governmental (Medicare) and private insurance programs.

Data Characteristics

Michigan hospitals are required to file an Indigent Volume report along with the Medicaid cost report every year that is used to calculate a special payment, which totaled $45.0 million in 2000 to the 47 hospitals determined to be providing a disproportionate share of care to indigent persons. Because some two-thirds of the hospitals do not receive payments as a result of filing the report and because not all reports have been independently audited, it is possible that information is not as accurate as it might otherwise be. The data has been submitted to the state by each facility and represents information in hospital files.

 

Uninsured and Uncompensated Care in Michigan

Table 3 shows year 2000 total uninsured and uncompensated charges, costs and recoveries and offsets for the 150 hospitals covered in this Memorandum.

Table 3, Michigan Hospitals
Uninsured and Uncompensated Care Charges, Costs, and Offsets
for Fiscal Years Ending October 1, 1999 through September 30, 2000

Total hospital charges for uninsured and uncompensated care in 2000 were some $1.1 billion. The costs associated with these charges were $620.0 million and hospitals received $163.8 million in funds against these charges. The resulting net cost was $456.2 million.

Table 4 is a listing of individual hospitals.

NOTE: This table shows the cost of uninsured and uncompensated care. Where payments exceed cost, the number is shown as a negative amount.

Table 4, Uninsured and Uncompensated Charges and Costs of Individual
Michigan Hospitals for 2000

One hundred twenty-eight facilities did not recover the cost of uninsured and uncompensated care, 10 reported none in either category, and 12 show payments for the uninsured, recoveries and offsets exceeding the cost of uninsured and uncompensated care due either to payments by uninsured persons exceeding costs or because of timing differences between the provision of services and receipt of payment, or both.

Table 5 shows the impact of uninsured and uncompensated cost on the financial results of each hospital in state fiscal year 2000. Had these hospitals not experienced the financial results of uninsured and uncompensated care, the overall surplus would have been $1.1 billion rather than $635.4 million.

Table 5, Effect fo Uninsured and Uncompensated Costs on
Individual Hospital Financial Results for 2000

Health Systems Planning Areas

In the late 1960s, the state designated 8 health systems planning areas. Table 6 reflects uninsured and uncompensated data for these areas with the City of Detroit separated from the Southeast area. The Southeast area and the City of Detroit (46.8 percent of Michigan's population) account for 68.7 percent of total net uninsured and uncompensated costs.

Table 6, Uninsured and Uncompensated Costs of Michigan Hospitals
by Health System Areas

Summary

According to the United States Census Bureau, some 1 million of Michigan's 9.9 million citizens were not covered by health insurance for the entire calendar year 2000. This was down from a high of 1.1 million in 1998. Until 1998 the trend had been generally upward in both numbers and percent. There are indications that numbers may be on the rise again as a result of the weakened economy and the rising cost of health insurance.

While Medicare and Medicaid address the provision of hospital services for the aged and many without sufficient income to pay for services, there remains a substantial amount of hospital cost that is not reimbursed. In 2000, the portion identified as a result of uninsured and uncompensated care amounted to $1.1 billion in charges with a net cost of $456.2 million. The $456.2 million represents 3.1 percent of total net patient revenue and 74 percent of total hospital surpluses for 2000.

Some have suggested that the state should be the payer of last resort and reimburse hospitals for these unpaid costs. If the state were to enact a similar plan for hospitals as it has for nursing homes and managed care organizations (See CRC Note 2002-01) so that the resulting federal match was at the maximum payment level allowed by the federal government, hospitals would receive some $82.5 million in new funds. The current and foreseen shortfall in revenues necessary to continue current state programs (See CRC State Budget Notes) appears to preclude the use of general fund monies to address this issue.

Some Michigan counties have or are developing programs to assist local employers in paying for health insurance through what are known as 1/3, 1/3, 1/3 arrangements. Under these, the cost of health insurance is divided three ways among the employer, the employee and the county. It will be a few years before the impact of these initiatives are known.