HEALTH CARE, FARM FAMILIES AND RURAL COMMUNITIES

Paul E. McNamara, M.P.P., Ph.D.Extension Specialist in Health and Consumer

EconomicsUniversity of Illinois at Urbana-ChampaignDepartment of Agricultural and Consumer

EconomicsTel. 217 333-3769 Email mcnamar1@uiuc.edu

www.RetireWell.uiuc.eduwww.ace.uiuc.edu/cfe/health/ltci.html

Outline

• Health Care Trends• Health Care Spending and Health

Insurance Coverage for Farm Families

• Rural Health Systems and Rural Hospitals

• Access to Mental Health Services in Rural Illinois

• Conclusions

Health Care Trends

• Sustained high and growing levels of health care costs– Impacts on firms– Squeeze on families

• Lack of Health Insurance Coverage • High cost of health insurance coverage

in small group and individual market • Other – workforce issues, medical

liability, technology

National Health Expenditures as a Percentage of GDP

Health Care Spending as a Percentage of Gross Domestic Product

0

2

4

6

8

10

12

14

16

18

20

1993 1998 2001 2002 2003 2004 2005 2013

Year

Per

cent

age

Source: Heffler, Smith, Keehan et al., 2004

Health Spending Per PersonHealth Spending Per Person

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

1993 1998 2001 2002 2003 2004 2005 2013

Year

Dolla

rs (N

ot A

djus

ted

for I

nfla

tion)

Source: Heffler, Smith, Keehan et al., 2004

What is Driving High and Growing Health Care Costs?

8.8% Increase in Personal Health Care Expenditures in 2002–Medical prices 4.1%–Age-sex mix 0.2%–Population growth 1.0%–Increased use 3.5%

Uninsured in Illinois and the U.S., 2001-2002

21.1%21.1%Children <200% of Poverty

31.5%32.2%Nonelderly <200% of Poverty

17.6%19.1%NonelderlyAdults

11.2%12.1%Children

15.6%16.9%Nonelderly

IllinoisUnited StatesCategory

Source: Kaiser Family Foundation, December 2003

Characteristics of the Uninsured

• Over 43 million Americans uninsured in 2002

• 1/3 of nonelderly Americans come from low-income families (less than 200% of the poverty level or about $29,000 for a family of three in 2002) – However, low-income people comprise

about 2/3s of the uninsured• While 30% of all workers are either self-

employed or work in a firm with less than 25 employees, they make up nearly half of the uninsured workers

Source: Kaiser Family Foundation, December 2003

FARMERS & FARM FAMILIES

Farmers and farm families face high premiums for health insurance since they lack the ability to pool risks in an employment pool

Farmers and Farm Workers Have High Rate of Uninsured (18-64, 2001-02)

9.34.952.3Prof. & Mgrs

20.50.20.9Agriculture

Services

Construction

Agriculture

Other Occup.

Total Workers

Category

34.65.014.6

37.83.28.4

42.70.51.2

23.220.889.7

18.125.7142.1

Rate %Uninsured (mil.)Workers (mil.)

Source: Kaiser Family Foundation, December 2003

Farm families are often underinsuredUnderinsured people spend more than 10% of their living expenses on health care insurance and out-of-pocket costsOn average, Illinois farm families spent 14% of living expenses on health care in 2002

Medical Spending for Illinois Farm Families

Medical Spending for Illinois Farm Families

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1995 1996 1997 1998 1999 2000 2001 2002

Year

Dolla

rs p

er Y

ear

(not

def

late

d)

5%10%25%50%75%90%95%

Source: Illinois Farm Business Farm Management Association Records, U of Illinois Dept of Agric. & Consumer Economics

Medical Expenses for Illinois Farm Families, 1995-2002

Percentiles of Medical to Family Living Expenses, Illinois Farms, 1995-2002

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

1995 1996 1997 1998 1999 2000 2001 2002

Year

Ratio

of M

edic

al/F

amily

Liv

ing

Expe

nses

5%10%25%50%75%90%95%

Cumulative Distribution of Farm Family Medical Expenses to Family Living

Expenses, 1058 Illinois Farms, 2002m

ed1

medtofliv_10 .1 .2 .3 .4 .5 .6 .7 .8 .9 1

.000945

1P

ropo

rtio

n of

Illi

nois

Far

ms

in S

ampl

e

Source: Data from Illinois Farm Business Farm Management Assoc. Survey

Cumulative Distribution of Medical Spending for 1058 Illinois

Farms, 2002cu

m1

D0360 5000 10000 15000 20000 25000 30000 35000 40000

0

.1

.2

.3

.4

.5

.6

.7

.8

.9

1

Pro

port

ion

of I

llino

is F

arm

s in

Sam

ple

Medical SpendingSource: Data from Illinois Farm Business Farm Management Assoc. Survey

Hired farm workers have one of the lowest rates of health insurance

coverage of any type of employment

AGRICULTURAL WORKERS

Some estimate that only 10% of migrant farm workers have health

insurance coverage

Percentage of Uninsured Workers by Type of Employment: Hired Farm Workers, Farmers, and

Others, 1995-1999

0

5

10

15

20

25

30

35

40

45

Hired F

arm W

orkers

Farmers

and F

arm M

anag

ersFore

stry a

nd Fish

ingCon

struc

tion

Restau

rants

Hotels

All Othe

rs

Perc

enta

ge o

f Wor

kers

Uni

nsur

ed

Source: McNamara and Ranney, 1999. “Hired Farm Labor and Health Insurance Coverage.”

Rural Health Systems and Rural Hospitals

Rural health care systems face significant competition in the larger health care market place

Critical Access Hospitals

Emergency medical services

A need for continued local support and leadership in rural communities for the health care system

Critical Access Hospital Program – Bringing Financial Sustainability

• Significant positive impact on CAH finances

• Question about what CAHs are doing with financial breathing room– capital investments – support for salaries and wages– retain ER coverage

• CAH program shifts risk from hospital back to payer and allows management flexibility

Market Structure

• Herfindahl Index – sum of squared market shares, ranges from 0 to 10,000

• Zip code basis, quintiles• IHCCCC 2001 Discharge

data – all Illinois discharges

• White areas most competitive, dark areas least competitive

• Does not account for cross-state border migration

What is the Value of a Rural Hospital?

• Why bother? – Evidence-Based Public Health and Health Care

Policy• Travel Cost Economic Framework • Applied in rural health research

– Clarke (valuing provision of mobile mammography services in rural Australia)

– Christianson and Bender (valuing the provision of rural hospital services in Montana)

Motivation

“…federal scrutiny of critical access hospitals has raised concerns about ‘inappropriate designation,’ and over-proliferation of critical access hospitals. MedPAC, in particular, has raised questions about the Flex program, but the GAO has also expressed concerns.”

Sent to rural health researchers April 2001

Study Data

• Hospitalization data for 2001 from the Illinois Health Care Cost Containment Council (ILHCCCC)

• a 40% random sample of Illinois pneumonia cases

• Hospital data from AHA Annual Survey of Hospitals

• GIS software to geocode rural people and hospitals using zipcodes

Pneumonia Patient Flows, IL 2001

1574

2670

572

4816

499

9989

10488

15304

n

32.7

55.4

11.9

31.5

4.8

95.2

68.5

100.0

%

-- used Other Rural

-- used Nearest Rural

-- used Urban Hosp.

Rural Origin

-- used Rural Hosp.

-- used Urban Hosp.

Urban Origin

Hospitalizations

Note: percentages in italics are with respect to that origin

Descriptive Statistics Pneumonia Hospitalizations, IL 2001

65.6Age

6.7Board Cert. MDs

131.1Total Beds

20.3Distance (miles)

21.4Travel Cost

10.7Travel Cost

Urban Origin

59.6Age

57.2Board Cert. MDs

304.4Total Beds

10.2

Mean

Rural Origin

Distance (miles)

Dewitt/DJWH Health Care Impact Study

• Examine key socio-economic and health care indicators

• Examination of the local health care system and the services it offers

• Key informant interviews with government, health care, and economic leaders identify strategic issues for the community

• Use Input/Output techniques to build a model of the economy

Health Care’s Impact in Dewitt County –Employment

Sector Name Employed Type SAM TotalMultiplier Impact

Pharmacies 35 1.09 38Doctors and Dentists 93 1.36 126Nursing and Protective Care 220 1.14 250Hospitals 179 1.28 229Other Medical and Health Services 84 1.25 105TOTAL 611 748

Table 2Economic Impact of the Health Sector on Employment

Employment Information

Health Care’s Impact in Dewitt County –Income

Sector Name Income Type SAM TotalMultiplier Impact

Pharmacies $513,000 1.20 $615,254Doctors and Dentists $2,435,000 1.29 $3,133,804Nursing and Protective Care $3,141,000 1.21 $3,794,765Hospitals $5,143,000 1.24 $6,370,464Other Medical and Health Services $1,752,000 1.26 $2,200,333TOTAL $12,984,000 $16,114,620

Income Information

Table 3Economic Impact of the Health Sector on income

Access to Mental Health Services in Rural Illinois

• October 14, 2003 in Springfield– Sponsored by the Illinois Rural Health Association – Over 100 people attended

• Key issues– Increasingly severe workforce shortages– Transportation problems– Long waiting lists– Stigma– Fragmented or unavailable services– Financial disincentives for service delivery

• Recommended responses– Parity in health insurance coverage for mental health

services– Incentives to induce mental health providers to serve

in rural areas

Options for Public Policy Advocacy

• Communicate the importance of your local health care system to your representatives

• Continue to support your local hospital, EMS, and other health care providers

• Seek parity in health insurance coverage for mental health and medical conditions

• Express concern about health insurance costs, health care costs, and difficulties in affording health insurance for agriculture

Conclusions

• A significant proportion of people in agriculture face difficulties with health insurance coverage and health care costs

• Real value of locally provided health care services in rural Illinois– Employment impact– Value of access

• Opportunity to influence policy makers and support rural health