Financing
Health
Care
for Disabled
Children
Paul
W. Newacheck,
MPP,
and
Margaret
A. McManus,
MHS
From the Institute for Health Policy Studies, University of California, San Francisco, and McManus Health Policy, Inc, Washington, DC
ABSTRACT. Information about health care use,
charges, and out-of-pocket expenses is critical to the
development of an equitable and efficient treatment
system for disabled children. Data from the 1980
Na-tional Medical Care Utilization and Expenditure
Sur-vey were used, and differences in use, charges, and
out-of-pocket expenses for children with and without
lim-itations in their activities due to chronic health
prob-lems are described. The results indicate that children
limited in their activities used more medical services
than other children, especially hospital-based services
and services provided by health professionals other
than physicians. Charges and out-of-pocket expenses
were two to three times higher on average for disabled
children, compared with other children. Charges and
out-of-pocket expenses were also skewed; 10% of the
sample children accounted for more than 60% of total
charges and out-of-pocket expenses for the disabled
population. The skewed distribution ofout-of-pocket
ex-penses suggests that financial burdens are unevenly
shared by families of disabled children. Several public policy options designed to result in a more equitable distribution of financial risks are discussed. Pediatrics 1988;81:385-394; health care financing, disability.
Between 10% and 15% of US children have
chronic illnesses of varying severity levels.’ Most
are only mildly affected, but a substantial
minor-ity of children with chronic illness are limited in
usual child activities by their illness. The degree
of limitation of activity varies from those who are
unable to attend school, to those who must attend
special schools, to those who attend regular
schools but are limited in their ability to conduct
other activities. Estimates of the numbers of
chil-Receivedforpublication March 12, 1987; acceptedMay27, 1987.
Portions of this paper were presented at the 114th Annual
Meeting of the American Public Health Association, Oct 1,
1986, Las Vegas.
Reprint requests to (P.W.N.) Institute for Health Policy
Stud-ies, University of California, San Francisco, 1326 Third Aye,
San Francisco, CA 94143.
PEDIATRICS (ISSN 0031 4005). Copyright © 1988 by the
American Academy of Pediatrics.
dren with such disabling conditions remain low,
yet there is evidence from the National Health
Interview Survey that the number and proportion
of children with some degree of limitation of
ac-tivity is increasing.2 Although researchers are not
sure why prevalence of childhood disability has
increased, possible explanations include changes
in survey methods, increased awareness of
chronic illness, and improved survival rates for
low birth weight babies.3
Chronically ill children, particularly those with
conditions that limit usual activities, use a
dis-proportionate amount of health care services as
compared with other children. The limited
infor-mation currently available on hospitalization and
physician visits shows that a small number of
dis-abled children consume a large share of both of
these resources. The most recent published
re-sults from the National Health Interview Survey
indicate that children with limitation in their
ac-tivities made up almost 4% ofthe child population
younger than 17 years of age in 1979. Despite
their small numbers, they accounted for 19% of
all hospital discharges for children, 30% ofall
hos-pital days, and 9% of all physician visits.4
Information about health care use, charges, and
out-of-pocket expenses for chronically ill children
is critical to the development ofan adequate
treat-ment and financing system, including one that
protects families from catastrophic medical
ex-penses. Unfortunately, little is currently known
at the national level about use and expenditures
for medical services provided to chronically ill
children. Most existing information is derived
from studies conducted at the state level or, more
often, at the local level and is often restricted to
certain types of chronic conditions. Although the
information gained from such studies has been
valuable, it is difficult to generalize from these
results to the nation as a whole. On the other
hand, most health surveys with nationally
information on charges and out-of-pocket
ex-penses. Surveys such as the National Health
In-terview Survey are useful in providing basic
in-formation on the prevalence of childhood chronic
illness and use of hospital and physician services
but provide little information on charges and
sources of payment for other health-related
ser-vices (eg, therapies, home health care) used by
chronically ill children.4
The 1980 National Medical Care Utilization
and Expenditure Survey (NMCUES), although
not as current as would be desired, represents a
major step toward filling in information gaps from
previous surveys.5 This survey collected data on
use ofa much wider variety ofhealth care services
than previous national surveys, and, most
impor-tant, data on expenditures and sources of payment
are included. This makes the NMCUES the most
current nationally representative data set that
can be used to analyze patterns ofhealth care use,
expenditures, and sources of payment for services
provided to chronically ill children. A new
na-tional health expenditures survey was conducted
in 1987, but release of public use data is not
ex-pected until 1990.
In this paper, data from the NMCUES are used
to assess (1) utilization of inpatient hospital
ser-vices, physician and nonphysician services,
pre-scribed medications, and health care equipment
and supplies; (2) total charges for these services;
and (3) family out-of-pocket expenses, as well as
other sources of payment. Utilization and
ex-penditure levels are compared for the population
younger than 21 years of age with and without
limitation of activity due to chronic health
prob-lems. Based on this analysis of the NMCUES
data, public policies to improve financing of
ser-vices for chronically ill children are discussed.
METHODS
The NMCUES, cosponsored by the National
Center for Health Statistics and the Health Care
Financing Administration, was designed to
pro-duce detailed information about the nation’s
health status, patterns of service use, charges for
services, and methods of payment. The household
survey was conducted during a 15-month period
spanning 1980 and early 1981 and was designed
to be representative of the US civilian
noninsti-tutionalized population. Members of 6,600
house-holds, which included more than 17,000 persons,
were interviewed a total of five times in person
or by telephone during the course of the survey.
In addition, heads-of-households were requested
to maintain diaries ofillness episodes, health care
use, and charge information. The use of diaries
and periodic interviews enhances the reliability
of the data collected, especially in comparison to
other cross-sectional surveys.5 The entire sample
of6,245 persons younger than 21 years ofage was
used for this analysis. All data presented in this
report were statistically weighted to reflect
na-tional population totals.
In this report we compare children and youth
with and without reported limitation in their
ac-tivities (play, school, or work depending on age
and usual activity). Previous analysis indicates
that the population limited in activity represents
a more severe subset of the population with
chronic conditions (P. Newacheck, unpublished
data, 1988). That is, not all children with chronic
conditions suffer from long-term limitations of
their usual activities. Disability and limitation of
activity are used interchangeably throughout the
text.
NMCUES interviewers were instructed to
in-dicate to the respondent that limitation of activity refers to long-term illness or disability only if the
respondent asked for clarification. Hence, it was
possible that a limitation reported in the
NMCUES could be caused by an acute condition.
However, the number of such cases should be
small because the questions asked concerning
limitation of activity were clearly meant to
con-note long-term reduction in activities rather
than short-term activity reductions such as those
caused by a common cold.
A second
limitation
ofthe NMCUES data stemsfrom the relatively small sample size. Ofthe 6,245
persons younger than 21 years in the sample, only
249 persons were reported to be limited in their
activities. In part, this limitation ofthe NMCUES
is counterbalanced by the presumed higher
qual-ity of the data collected. Nevertheless, the small
sample implies that few children with low
prey-alence chronic conditions will be present in the
sample. Because the most severe childhood
chronic conditions (eg, cystic fibrosis) occur
infre-quently, estimates from the NMCUES will be
based on small numbers of such severely ill
chil-dren. Like most other health surveys, the
NMCUES sample frame excluded the
institu-tional population. Hence, a large segment of the
most severely ill children and youths was
excluded.
A third limitation of the NMCUES is related to
response levels. Although the overall response
rate was high, partial nonresponse to specific
questions presents a problem. Item nonresponse
levels were low for demographic and utilization
questions but were relatively high for information
related to charges for health care services. The
Because health insurance (private or public) tends
to be most comprehensive for inpatient hospital
bills, a significant number ofsample persons were
unaware of the total charges for their stay.
Hos-pital charges were unreported for 36% of hospital
episodes. Rather than coding these as unknown
or unreported, the survey staff imputed values
based on experiences of similar sample persons
with reported charge information.7 A similar
ap-proach was used for missing information on use
and charges for other medical services.
A final limitation of NMCUES is that the data
were collected during 1980 to 1981. Since then,
hospital utilization for children has declined
sig-nificantly (L. J. Kozak, C. Norton, M. McManus,
unpublished data), out-of-pocket costs for all
ser-vices including hospitalization appear to have
in-creased (H. Fox and R. Yoshpe, unpublished data,
1988), a wide range of outpatient services have
been substituted for many inpatient services (eg,
surgery, rehabilitation),9 and insurance coverage
of selected preventive services and home health
care benefits has increased.’0” Unfortunately,
these financing and delivery changes affect the
reliability of NMCUES for use in public policy
debates about financial risks for chronically ill
children. Nevertheless, the NMCUES represents
the most current national information base for
ad-dressing questions of use, expenditures, and
sources ofpayment for chronically ill children. An
analysis similar to that reported here but using
more current data would undoubtedly yield
some-what different findings. However, we believe that
the basic conclusions reported here would not
dif-fer substantially were more current data
available.
RESULTS
Prevalence
of Limitation
of Activity
More than 3. 1 million (4%) noninstitutionalized
children and youth younger than 21 years of age
were estimated to have some limitation of activity
during 1980. Prevalence of limitation of activity
varied according to the sociodemographic
char-acteristics ofchildren and their families (Table 1).
Disability was more prevalent among teenagers
and young adults, boys, and white children.
Lim-itation of activity was also more common among
children in families with incomes below the
pov-erty level than among those with higher incomes.
Conditions
Causing
Limitation
of Activity
The leading reported causes ofdisability among
children and youth are shown in Table 2. The
con-ditions shown accounted for slightly more than
TABLE 1. Prevalence of Activity Limitations for
Persons Younger Than 21 Years of Age, 1980*
Characteristic
Age (yr)
All 4.0
<6 2.9
6-15 4.0
16-20 5.3
Sex
Male 4.2
Female 3.8
Race
White 4.2
Nonwhite 3.2
Income
< Poverty level 5.7
> Poverty level 3.9
* Microdata from the Nati onal Center for Health
Sta-tistics.5
half of all conditions reported as main causes of
limitation of activity during 1980. The most
fre-quently reported conditions were mental
disor-ders and nervous system disorders including
men-tal retardation, neurotic and personality
disorders, epilepsy, and cerebral palsy. An
esti-mated 568,000 children and youths were affected
by these types of conditions. The second leading
cause oflimitation of activity was respiratory
sys-tem diseases, principally asthma.
Musculoskele-tal and connective tissue diseases, including
ac-quired deformities, arthritis, and other joint
disorders, were reported as the third leading
cause of disability. The fourth was diseases and
disorders of the eyes and ears. (A main cause of
activity limitation was not reported for 605,000
individuals or 19% of the activity-limited
popu-lation younger than 21 years of age.)
Utilization
of Health
Services
Analysis of data from the NMCUES indicates
that children who were limited in their activities
used much higher levels of inpatient hospital
ser-vices than other children. As shown in Table 3,
children with limitation of activity were twice as
likely to be hospitalized during the course of a
year and spent four times as many days in
hos-pitals as other children. The distributional data
TABLE 2. Leading Causes of Activity Limitation in
Persons Less Than 21 Years of Age, 1980*
Cause Prevalence
per 1,000
Mental and nervous system disorders 7.3
Respiratory diseases 6.0
Musculoskeletal and connective tissue 4.3
diseases
Eye and ear diseases and disorders 3.7
* Microdata from the National Center for Health
Hospital
Admissions per
1,000
Hospital Days
per 1,000
Av Annual No.
Physician Visits Nonphysician Visits Prescribed Medications Other Medical Expenses
Limited in activity 269.0 1,739.1 5.1 5.5 4.0 0.4
Not limited in activity 123.5 441.9 2.8 0.9 2.0 0.2
* Microdata from the National Center for Health Statistics.5
TABLE 4. Use of Medical Services by Persons
Younger Than 21 Years of Age, 1980*
Limited in Not Limited in
Activity Activity Hospital days 0 1-7 8+ Physician visits 0 1 2 3 4 5+ Nonphysician visits 0 1 82.0 14.5 3.5 14.2 13.7 15.7 10.7 6.6 38.9 56.8 14.8 6.1 6.4 2.9 13.1 92.3 6.9 0.8 26.6 22.2 15.1 9.6 7.1 19.3 70.8 16.8 5.6 2.5 0.9 3.4 5+
Other medical services
TABLE 3. Utilization of Health Services by Persons Younger Than 21 Years of Age, 1980*
shown in Table 4 indicate that disabled children
were also three times as likely to spend eight or
more days in the hospital. (Overall, reported
hos-pital days per 1,000 in the NMCUES are
some-what higher than those reported from other
sources such as the National Hospital Discharge
Survey. This difference is likely to be
attribut-able, at least in part, to differences in data
col-lection methods.)
NMCUES data indicate that disabled children
also used high levels of physician services.
Chil-dren limited in their activities made almost twice
as many visits to physicians as other children, on
average. Approximately 85% of children with
such limitations had at least one physician
con-tact in the last year compared with 74% for other
2 3
4
5+
Prescribed medications
0 36.8 44.6
1 10.9 17.5
2 11.6 12.7
3 8.7 6.8
4 6.3 5.2
25.8 13.4
0 78.9 88.3
1 12.1 9.4
2 3.3 1.7
3+ 5.7 0.6
* Microdata from the National Center for Health
Sta-tistics.5
Results are percentage distributions.
children. Disabled children were also twice as
likely to have five or more physician visits (Table
4).
More substantial differences are demonstrated
for visits to nonphysician health professionals.
Children limited in their activities saw
nonphy-sicians more than five times as often as other
chil-dren, on average. They were also four times as
likely to have five or more visits. Nonphysician
health professionals included nurse practitioners
and other physician extenders who work on their
own or with a physician, as well as psychologists,
social workers, and physical therapists among
others. Such dramatic differences in use of
non-physician professional services should be expected
given the greater need for habilitative and
re-habilitative services on the part of chronically ill
children.
Utilization differences were also apparent for
prescription drugs and “other” medical expenses.
Children limited in their activities received twice
the number of prescribed medications (including
refills) as other children and twice the number of
“other” medical items which include vision aids,
orthopedic items, hearing aids, diabetic items,
and ambulance or medical transportation
services.
Overall then, children with activity-limiting
illnesses were at least twice as likely to use any
of the basic health services shown in Table 3. For
inpatient hospital services and nonphysician
professional services, the differentials were much
greater. Were other medical and health-related
services and supplies used principally by
chroni-cally ill persons included, the differential in
re-source use by this population would look even
more dramatic.
Expenditures
for Health
Services
Total charges for the health services shown in
Table 5 averaged $760 per child limited in activity
compared with $263 for other children during
1980 (using the medical care component of the
Consumer Price Index for 1986, the average
would be $1,239 per disabled child compared with
$429 for other children), a threefold difference. In
total dollars, disabled children and youth
TABLE 5. Average Charges and Out-of-Pocket Expenses for Persons Less Than 21 Years of Age, 1980*
Total Hospital Physician Nonphysician Prescribed Other Medical
($) Inpatient Services Services Medications Expenses
Services ($) ($) ($) ($)
($)
Charges
Limited in activity 760 344 256 112 29 20
Not limited in activity 263 123 103 17 12 8
Out-of-pocket expenses
Limited in activity 135 23 70 16 17 10
Not limited in activity 76 16 40 7 8 6
* Microdata from the Nation al Center for Health Statistics.5
of a total of $21.9 billion (35.7 billion in 1986
dol-lars) in charges for health services provided to the
population younger than 21 years of age during
1980. Hence, the 4% of children and youth who
were limited in their activities accounted for
nearly 11% of total health care expenditures for
the less than 21-year-old population. Their
dis-proportionate share of charges would be even
more substantial if data concerning charges for
other specialized health-related services used
principally by chronically ill children were
col-lected in the NMCUES.
In general, differences in charges for the
disa-bled and nondisabled population mirror the
dif-ferences in utilization shown in Table 3. For
ex-ample, inpatient hospital charges were nearly
three times higher for children with limitations
in their activities, whereas charges for physician
and nonphysician services were, respectively, 2.5
and 6.6 times higher than those for children not
reporting any limitation in their activities (Table
5).
Out-of-pocket expenses, those paid directly by
the family, are also shown in Table 5. On average,
out-of-pocket expenses for children limited in
their activities were about twice as high as those
for other children. Out-of-pocket expenses
aver-aged about 18% of total charges for those with
limitation of activity and ranged from only 7% for
inpatient hospital charges to 59% for prescription
medications. This pattern reflects the nature of
third-party insurance coverage, which tends to be
most comprehensive for hospital-based care and
least generous for services and supplies provided
outside of the hospital.
Although actual out-of-pocket expenses were
substantially higher for the disabled population,
they represented a smaller share of total charges.
For each dollar of direct payment, third parties
contributed $4.62 for children limited in their
ac-tivities compared with $2.46 for children not
lim-ited in their activities. In large part, the higher
share paid by third parties reflected the
dispro-portionate use of hospital-based services by
chil-dren limited in their activities. Not only were
charges for basic inpatient hospital services much
higher for such children but so were charges for
other hospital-based services. For example,
among children with activity-limiting illnesses,
35% of physician charges were for inpatient
pro-cedures. By comparison, only 20% of charges by
physicians for nondisabled children were for
in-patient procedures. The larger share of total
ex-penses paid by insurers and other third parties
was also related to higher service use by children
with limitation of activity. Because they used
more services, these children were more likely to
exceed deductible levels and begin receiving
in-surance compensation. By comparison, the lower
utilization levels characteristic of nondisabled
children suggest that many did not exceed
de-ductible levels.
High and Low Cost Children
Average charge figures can be misleading if
charges are distributed in a skewed fashion.
Com-parison ofmean and median total charges for
chil-dren and youth limited in their activities suggests
this is the case. Average charges ($760 in 1980)
were five times greater than median charges
($145), suggesting that the charge distribution is
characterized by large .numbers of children and
youth with low charges and small numbers with
high charges. This distribution is illustrated in
the Figure, where children and youth limited in
their activities are ranked according to total
charges. It is apparent that the lower decile of
these children and youth experienced no charges
during 1980, whereas the upper decile
accumu-lated charges of$1,800 or more. Put another way,
the upper decile of children and youth accounted
for 65% of all charges accumulated by the
popu-lation limited in activities, and the upper quartile
accounted for 87% of total charges. These data
suggest that the disabled population was not
ho-mogeneous in its use of expenditures for medical
care services. Rather, the great majority of
chil-dren limited in their activities consumed few
a relatively small group made extensive use of
services and accumulated much higher total
charges.
Out-of-pocket expenses were skewed in a
sim-ilar fashion as shown in the Figure. More than a
quarter of the population with reported
limita-tions in their activities had no out-of-pocket
ex-pense, whereas direct patient payments exceeded
$300 for the upper decile of children and youths.
The upper decile accounted for 63% of all
pay-ments made directly by patients, and the upper
quartile accounted for 85% of all out-of-pocket
expenditures.
For public policy purposes it would be useful to
know whether those in the high end of the total
charge and out-of-pocket expense distributions
could be categorized by their demographic or
health characteristics. Unfortunately, the sample
is too small to categorize high cost patients by
health characteristics. However, we did examine
differences between high and low cost patients
across several basic demographic characteristics,
as shown in Table 6. This table shows that
disa-bled children and youth with higher total charges
tended to be older and were more likely to come
from low income families. No substantial
differ-ences were apparent by sex or race. These results
are consistent with those of other surveys which
show that severity of limitation of activity
in-creases with age and that low income persons tend
to be more severely limited in their activities.2
Charges
$2000
$1800
$1600
$1400
$1200
$1000
$800
$600
$400
$200
$0
Comparison of children and youth with high
and low out-of-pocket expenses, also shown in
Table 6, reveals that disabled children with high
direct expenses were likely to be older. By
com-parison to persons with low out-of-pocket
ex-penses, those with high expenses were also
dis-proportionately girls and white. In contrast to the
pattern apparent for total charges, low income
persons were disproportionately represented in
the low out-of-pocket expense group. That is, low
income disabled children tended to be at the high
end of the total charge distribution but at the low
end of the out-of-pocket expense distribution. In
part, this phenomenon can be attributed to
Med-icaid which tends to have minimal or nonexistent
copayment levels when compared to other
third-party payors. Nevertheless, approximately 15% of
the high out-of-pocket expense group had family
incomes that placed them below the official
pov-erty level.
Insurance
As indicated, public and private third-parties
paid 82% of all charges for services provided to
disabled children and youth. Coverage was
un-even, however, with approximately three fourths
of the population limited in activities covered the
entire year and the remainder covered for only
part of the year or not at all during 1980 (Table
7). Disabled children were most likely to be
in-10th 20th 30th 40th 50th 60th 70th 80th 90th
Percentile
I
.
Out-of-pocket expenses Total chargesFigure. Total charges and out-of-pocket expenses for
children and youth younger than 21 years of age,
United States, 1980. Microdata from the National
TABLE 6.
Percentage Distribution of Activity-Limited Persons With High and LowCharges and Out-of-Pocket Expenses for Persons Less Than 21 Years of Age, 1980*
Characteristics Total Charges Out-of-Pocket Expenses
Lowest Highest Lowest Highest
Quartile Quartile Quartile Quartile
Age (yr)
<6 25.6 20.1 19.7 17.0
6-15 48.1 37.5 55.9 42.4
16-20 26.3 42.4 24.4 40.6
Sex
Male 51.0 53.3 56.3 47.0
Female 49.0 46.7 43.7 53.0
Race
White 88.8 88.0 85.5 89.4
Nonwhite 11.2 12.0 14.5 10.6
Income
Below poverty level 15.1 25.0 33.1 15.6
Above poverty level 84.9 75.0 66.9 84.4
* Microdata from the National Center for Health Statistics.5
TABLE
7. Insurance Characteristics for Activity-Limited PersoofAge, 1980*
ns Less Than 21 Years
% Distribution by % Distribution by
Length of Coverage Type of Coverage
% Charges Paid Out-of-Pocket by Type of
Coverage
All year 77.1
Partyear 16.3
No coverage 6.6 6.6
Private only 59.6
Public only 18.1
Public and private 15.7
50.4 21.3 2.7 17.8
* Microdata from the National Center for Health Statistics.5
sured by private health insurance, although a
substantial minority were insured by public
health insurance plans (principally Medicaid) or
a combination of public and private plans.
Ex-posure to out-of-pocket expenses also varied
sub-stantially by type of insurance; disabled children
with public insurance were best
protected-pay-ing out-of-pocket for only 3% of health care
ex-penditures on average-when compared with
similar children with private insurance or no
insurance.
DISCUSSION
The NMCUES results presented here on
utili-zation patterns substantiate those of previous
lo-calized studies and other national surveys. In
ad-dition, the NMCUES provides a substantial
amount of new information concerning use of a
broad range of health services as well as
expend-itures and out-of-pocket expense information that
was previously not available.
Disabled children used more services than other
children, particularly hospital-based services and
services provided by health professionals other
than physicians. As a result of greater use, their
charges and out-of-pocket expenses were also
much higher. Charges and out-of-pocket expenses
were found to vary greatly from individual to
in-dividual. Most disabled children in 1980
experi-enced low charges and out-of-pocket expenses.
These results suggest that chronically ill children
are not a homogeneous group with regard to use
of services, charges, and out-of-pocket expenses.
Many, if not most, disabled children exhibit
ser-vice use, charge, and out-of-pocket expense
pat-terns similar to that of the population not limited
in activity. Although those with higher
expend-itures tended to be older, the high cost group did
not neatly fit a single demographic profile.
The skewed distribution of out-of-pocket
cx-penses-10% of disabled children accounting for
63% of total direct patient payments-indicates
that financial burdens were unevenly shared by
families of chronically ill children. Children
with-out any insurance faced the greatest financial
risks, but those with intermittent or part-year
in-surance also faced substantial financial risk.
Several policy options may be considered to
re-duce financial risks experienced by families
with-out adequate health insurance protection for
cat-astrophic expenses. These include redirecting
existing resources, expanding Medicaid coverage,
pro-gram of catastrophic expense protection for fam-ilies of disabled children.
Targeting
Existing
Resources
Toward
Financially
Vulnerable
Families
and
Improving Delivery of Services
During the years state Crippled Children’s
Ser-vice programs (now known as programs for
chil-dren with special health care needs) have evolved
in many different directions. All programs offer
case management services, but programs vary
ac-cording to which medical and social services are
provided. Although there often remains an
em-phasis on orthopedic disorders, states are variable
in determining types of chronic conditions
coy-ered. Most states cover some chronic conditions
fully, but others may not be covered at all.’2 Some
states impose strict financial eligibility criteria,
whereas others impose minimal financial
restric-tions. The result is that what services a child
re-ceives and how much the family pays depends
largely on where the family lives. Even within a
single state the family of a child with one type of
chronic condition may experience tremendous
fi-nancial burdens, and a child with a different
con-dition, but no less severe, may be well protected.
One approach to reducing current inequities
would be for states to gradually place more
em-phasis on family financial status in relationship
to projected treatment costs and less emphasis on
type of chronic condition. Doing so, through
in-creased use of sliding income scales to determine
eligibility and family contributions, would help to
equalize financial burdens among families with
disabled children. Projected treatment costs could
be obtained by examining historical data on
sim-ilar clients.
Many state Crippled Children’s Service
agen-cies appear to have the capacity to provide
addi-tional help to families in securing financial aid
and reducing out-of-pocket expense burdens. A
re-cent survey of state programs revealed that only
halfuniformly provided help in securing financial
aid to families with disabled 2 Increased
efforts at securing financial assistance should not
only reduce family financial burdens, but also
help to conserve scarce Crippled Children’s
Ser-vice monies.
Crippled Children’s Service agencies can also
expand services and conserve limited resources by
working toward improved private health
insur-ance of services used by chronically ill children.
Because about 75% ofdisabled children have some
type ofprivate health insurance, substantial
Crip-pled Children’s Service savings could then be
ac-crued if benefits under private plans were made
more comprehensive. Historically, there has been
little reliable information available concerning
the depth and breadth ofprivate health insurance
benefits for chronically ill children. During 1986,
a national survey of 60 randomly selected
em-ployers who provided group health insurance to
their employees was conducted (H. Fox and R.
Yoshpe, unpublished data, 1988). Similar to
re-sults from our analysis of NMCUES, this recent
survey indicated that some services used by
chronically ill children were well covered,
espe-cially those provided in the hospital inpatient
set-ting. Community-based services were less well
covered including outpatient physician services,
occupational and speech therapy, home health
aids, visiting nurse services, and mental health
counseling.
This situation now appears to be shifting
grad-ually as insurers and employers have begun to
recognize that provision ofcommunity- and
home-based services for chronically ill children can
re-sult in cost savings relative to hospital-based care.
As a result, substantial improvements in coverage
of community-based services, especially home
care, have occurred in the past few years.
Cur-rently, it is estimated that 64% of employer-based
plans include a home care package (including
oc-cupational, speech, physical, recreational
ther-apy, and social work). Although the majority of
plans continue to limit the types of home care
ser-vices available and the numbers of services
pro-vided each year, the current home care packages
represent a substantial improvement over the last
decade (H. Fox and R. Yoshpe, unpublished data,
1988).
Improvements in private health insurance of
community-based services can help to save
Crip-pled Children’s Service resources that otherwise
would be used to finance such services. At both
the state and local levels, Crippled Children’s
Ser-vice administrators can foster the trend toward
improved coverage by meeting with large
corn-panies and explaining the potential cost savings
that can result from expanded coverage of
corn-munity-based services for chronically ill children.
State-Sponsored
Risk-Sharing
Pools
A substantial minority of families with
chron-ically ill children are unable to obtain continuous
public or private health insurance. If they are
without employer-based insurance and their
in-comes exceed Medicaid limits they are often
forced to obtain expensive and sometimes
made-quate individual insurance or go without coverage
at all. States have begun responding to this
risk-shar-ing pools. At least ten states have enacted such
legislation and many others are considering
pass-ing enabling legislation. The risk pool programs
offer relatively comprehensive health insurance,
sometimes at subsidized rates to families and
in-dividuals unable to purchase health insurance
be-cause of chronic disabilities or other health
prob-lems. Premiums are effectively group rated and
usually lower than those that could be obtained
by high-risk persons through individually
pur-chased insurance plans. In general, risk pools
re-quire that all health insurers operating in the
state participate, with the exception of
self-in-sured employer plans which are exempt under the
federal Employees Retirement Income Security
Act of 1974. Monthly premiums in six states with
operating plans ranged from $42 to $103 per child
in 1986 with deductibles ranging from $150 to as
much as $1,500 during 1985.’
These programs can offer substantial help to
moderate income families unable to obtain
ade-quate insurance elsewhere. Still, many low
in-come families with incomes above Medicaid limits
have found it difficult to afford the risk pool
pre-miums, which are typically greater than the
pre-miums for standard insurance. For those families,
the alternatives range from foregoing needed care
to spending down family income and assets to
achieve Medicaid or Crippled Children’s Service
eligibility. To alleviate the burden of
higher-than-standard premiums, states might consider
devel-oping sliding premium schedules according to
family income. Wisconsin currently uses such an
approach and contributes from 6% to 30% of
pre-mium costs for low income policy holders.’3
Although the state risk-sharing pools were
de-signed to increase insurance availability, they
have sometimes failed to attract a large enough
pool to become financially viable. In part, this
problem is attributable to the Employees
Retire-ment Income Security Act provision that limits
state regulation over self-insured employer plans.
It is estimated that at least 30% of employee
ben-efit plans fall under the exemptions and the
num-ber of firms opting for self-insurance appears to
be growing. Hence, the costs of covering high-risk
persons is unfairly carried by nonexempt
insurers.
Expanded
Medicaid
Coverage
for Disabled
Children
in Low Income
Families
Results from the NMCUES indicate that
chil-dren in families with incomes below the poverty
level faced a 40% higher likelihood of disability.
For these chronically ill children, Medicaid is
often the primary vehicle for obtaining needed
health care services. Yet, unpublished data from
the 1982 National Health Interview Survey
in-dicate that only 57% of disabled children below
poverty had Medicaid coverage. Although this
fig-ure compares favorably to the percentage of
non-disabled impoverished children with Medicaid
coverage, it implies that more than 200,000
im-poverished disabled children were without
Med-icaid coverage in 1982. Raising income limits
under the Aid to Families With Dependent
Chil-dren and Supplemental Security Income
pro-grams would substantially improve coverage for
disabled children. The Congressional Budget
Of-fice estimated that increasing Aid to Families
With Dependent Children and Medicaid
thresh-olds to a national floor of 65% of the poverty level
would have cost about $700 million in 1985 and
would have provided coverage to an additional
700,000 children.’4 With the recent enactment of
legislation permitting states to increase Medicaid
eligibility levels for children 0 to 5 years of age
to the poverty level without increasing Aid to
Families With Dependent Children cash
assist-ance levels, it is now possible for states to increase
Medicaid eligibility thresholds at even lower
costs.
Another option to increase coverage of children
above current Medicaid eligibility thresholds is
altering existing Medicaid eligibility and
spend-down rules to permit low and moderate income
families to purchase Medicaid coverage through
income-adjusted premiums. Such an approach
could be more cost-effective for families and
gov-ernment than the state-run Catastrophic Health
Insurance Plans because the basic program
mech-anism is already in place. Adoption ofsuch a
Med-icaid “buy-in” program would be particularly
ben-eficial to moderate income families and low
income families with children older than 5 years
of age who will not benefit from the recently
passed federal Medicaid legislation.
Federally
Sponsored
Catastrophic
Health
Expense
Protection
for Disabled
Children
A different approach to reducing the financial
risks and burdens for families with chronically
disabled children would be to adopt a national
cat-astrophic health insurance program. Under this
option, the federal government would subsidize
the costs of health care for families of disabled
children with exceptionally high out-of-pocket
ex-penses. Federal assistance would be provided
when out-of-pocket expenses exceeded a certain
cash threshold (eg, $1,000) or a percentage of
fam-ily income (eg, 15%). The program could be
best administered through the existing Crippled
Children’s Services programs.
Because families of most disabled children
ex-perience only modest out-of-pocket expenses, the
costs of a catastrophic expense protection plan
that covers excessive out-of-pocket costs for this
population should not be large. Costs were
esti-mated using the NMCUES data for a national
pro-gram providing coverage for inpatient hospital
care, physician and other health professional
ser-vices, prescription drugs, orthopedic appliances,
vision and hearing aids, and medical
transpor-tation services. Excluded from these estimates are
the costs of institutional residential care, home
remodeling, and other specialized medical
equip-ment needed by some severely disabled children.
Costs were estimated by summing out-of-pocket
expenses for disabled children in 1980 and
corn-paring those to family income. After updating
es-timates according to consumer price index to
1986, we estimate that national program costs,
excluding administration, would be
approxi-mately $179 million for a program providing
100% protection for out-of-pocket expenses
begin-ning when a family expended $1,000 or 10% of
family income on their disabled child. We
esti-mate that approximately 139,000 disabled
chil-dren would benefit each year from such a
program.
Using the NMCUES figures on expenditures
and utilization to estimate the costs of a national
program for disabled children has its limitations.
First, as discussed earlier, families are now liable
for more out-of-pocket expenses than in 1980.
Sec-ond, the distribution of children that are insured
by public or private insurance has shifted since
the beginning of the decade. Third, only
nonin-stitutionalized children are included in
NMCUES. These cost estimates also assume that
families would not alter existing insurance
coy-erage or use additional services in response to
cat-astrophic expense protection. The estimates are
also provisional because they are based on a
rather small sample. Nevertheless, these results
suggest that a national program of catastrophic
coverage for families of chronically ill children
should result in relatively minimal additional
governmental expense.
ACKNOWLEDGMENTS
This work was supported by the Division of Maternal
and Child Health, US Department of Health and
Human Services, grant MC,J-063468. Data were
pro-vided by the National Center for Health Statistics.
Analyses, interpretations, and conclusions are solely
those of the authors and do not necessarily reflect the
views of the funding or data collection agencies.
The authors appreciate the comments of Han-iette
Fox, Helen Gonzales, Dorothy Guyot, and Neal Halfon
on an earlier version of this paper.
REFERENCES
1. Butler J, Budetti P, McManus M, et al: Health care
ex-penditures for children with chronic disabilities, in Hobbs N, Perrin J (eds): Issues in Childhood Chronic Illness. San
Francisco: Jossey-Bass, 1985, pp 827-863
2. Newacheck PW, Budetti PP, McManus P: Trends in child-hood disability. Am J Public Health 1984;74:232-236 3. Newacheck P, Budetti P, Halfon N: Trends in
activity-limiting chronic conditions among children. Am J Public
Health 1986;76:178-184
4. Health characteristics ofpersons with chronic activity
lim-itation, Vital and Health Statistics, series 10, data from
the National Health Survey; No. 137, US Department of
Health and Human Services publication No. 82-1565.
Hyattsville, MD, National Center for Health Statistics
1981
5. National Center for Health Statistics: Procedures and questionnaires of the National Medical Care Utilization and Expenditure Survey, National Medical Care Utiliza-tion and Expenditure Survey, series A, methodological re-port No. 1, US Department ofHealth and Human Services
publication No. 83-20001. Government Printing Office,
March 1983 6. Deleted in proof
7. Public Use Data Tape Documentation, National Medical
Care Utilization and Expenditure Survey, 1980 US
De-partment of Health and Human Services, Public Health
Service. August 1983
8. Deleted in proof
9. Pen-in JM, Valvona J, Sloan FA: Changing patterns of
hospitalization for children requiring surgery. Pediatrics
1986;77:587-592
10. Fox H, Yoshpe R: Technology-dependent children’s access to Medicaid home care financing. A report prepared for
the Office of Technology Assessment, United States
Con-gress, June 1986
11. Newacheck P: The costs of caring for chronically ill
chil-dren. Business Health 1987;4:18-24
12. Ireys HT, Hauck RJ-P, PerrinJM: Variability among state
crippled children’s service programs: pluralism thrives.
Am J Public Health 1985;75:375-381
13. Child Health Financing Report. Elk Grove Village, IL,
American Academy of Pediatrics, Summer 1986, vol 3
14. Congressional Budget Office: Reducing poverty among
children. Congress of the United States, 1985
