At this unique moment in time, Pennsylvania has a historic opportunity to use the monies that will be awarded to us through the tobacco settlement to create a framework for the delivery of health care in the Commonwealth in the coming century.  If these monies are spent wisely, we can address the related problems of the growing number of uninsured in our state, and the staggering costs of hospital charity care. We can nurture medical research at our academic health centers—research that not only can lead to new treatments and medications, but also can serve as a cornerstone for our emerging technology based economy.   And finally, we can establish a public health infrastructure that can serve our communities into the next century.

If we are wise stewards we can do all these things.

In January, I joined my colleagues in the House Democratic Caucus in unveiling a framework for the tobacco settlement funds.  At that time, we proposed two guiding principles.  First, that these monies should be used for health related programs.  And secondly, that these monies should be used to build on existing state commitments, not supplant them.  These principles, I believe, should continue to guide our deliberations.

In the testimony that follows, I outline three basic areas that I feel should be funded: promoting broader access to health care, supporting medical research, and building our public health infrastructure.  It is my understanding that annually, Pennsylvania will receive slightly over $400 million.  I would suggest that, at a minimum at least 75% of these monies ($300 million) should be spent on promoting access to care.  Medical Research should receive up to 20% of the available funds ($80 million), with the remainder ($20 million) being used to expand public health programs.

ACCESS TO HEALTH CARE

The first focus for the use of tobacco settlement funds should be to promote access to health care.  The Census Bureau estimates that one of every ten Pennsylvanians is not insured.  The federal Medicare program, the Medicaid program and the Children’s Health Insurance Program have been instrumental in reducing the numbers of uninsured at the ends of the age spectrum. But the number of working age adult Pennsylvanians without health insurance is a great concern.  Today, nearly 13% of our state’s population between the ages of 18 and 65 do not have health insurance.  Pennsylvania is facing the fourth fastest rate of growth in the number of uninsured.

Let me be clear, individuals without health insurance coverage do not go without health care services.  But studies have shown that they delay treatment until care becomes urgent, and then they seek it in more expensive settings, such as hospital emergency rooms and in inpatient treatment.

The Health Care Delivery System in Pennsylvania is undergoing a rapid and profound transformation.  Fueled in large part by dramatic growth in managed care, a number of other factors are shaping the future of health care in the Commonwealth.  These include the continued growth in the uninsured population; increased shifting of the cost of health insurance from employers to employees and their families; budget reductions in Medicare and Medicaid; improvements in medical technology and practice patterns; and the declining ability of health systems to deliver uncompensated care.  These factors are combining to radically change the face of health care in Pennsylvania.

The recent bankruptcy of the Allegheny system is simply the visible sign of this transformation.  Nearly two thirds of our state hospitals are operating at a deficit.  New mergers are announced almost daily, nearly as often as worker lay-offs and restructuring plans. Some hospitals have closed their doors; others have restricted the services they offer.  Last year, Pennsylvania hospitals provided over $700 million in uncompensated care.

There is a direct connection between the growth in hospital charity care and the rising number of uninsured in our state.  By and large hospitals have treated the poor and uninsured, in part because it was their historic mission, and in part because state and federal funding requirements and tax law required them to do so.  But the market forces to which I referred make our dependence on hospital charity care unsound.  As the focus of treatment moves to outpatient and ambulatory settings, there obviously will be less need for inpatient hospital beds.  Some estimates suggest that over the next decade half of the hospital capacity in our state should close.  The institutions which will take their place will not have the same legal and moral responsibility to serve the uninsured and poor.  And it is more likely that they will not even be located in these communities where the poor and uninsured are concentrated.

Who are the Uninsured?

Nationally, the Census Bureau tells us that the uninsured tend to be more poor and more minority than the population at large.  We do not have good demographic or geographic data on the uninsured in Pennsylvania—we really don’t know where they live or who they are.  That is a problem that I will address when I get to the public health infrastructure in our state.

Our Department of Health estimates that men are more likely to be uninsured than women; that the 18 to 29 age group is twice as likely to be uninsured as the those Pennsylvanians ages 30 to 44 and those 45 to 64.  Individuals without a high school degree are twice as likely to not have health insurance as those with a college degree.  Individuals whose income falls between $10,000 and $20,000 are more likely not to have health insurance—six times more likely than those with incomes above $35,000 but also nearly twice as likely as those with incomes below $10,000.

With the advent of the tobacco settlement funds, we have the opportunity to address the issue of access to health care in two ways.  First, we can provide health insurance coverage for additional segments of the uninsured population.  Second, we can assist hospitals in addressing the financial burden of uncompensated care.  I believe that providing health insurance coverage is a more direct solution and, thus, is sounder public policy.  Therefore, I would recommend that at least three-quarters of the money used to promote access to care be used in the effort to provide insurance coverage (approximately $225 million) and one quarter ($75 million) be used for uncompensated care.

In terms of expanding health insurance coverage, I believe that there are three groups that should be our initial targets.  They are the parents of children currently enrolled in the CHIP program; Medicare recipients who are not able to access Medicaid to provide their Part B coverage; and individuals who are eligible for COBRA coverage because they have become unemployed.

Parents of CHIP Enrollees

The Children’s Health Insurance Program created in 1993 has proved to be one of the most significant social service programs ever launched by state government.  In 1998, over 60,000 children were enrolled in the program and an equal number were eligible for coverage.  These children receive coverage through CHIP because their parent or parents earn too much to qualify for Medicaid, but do not have employer-sponsored health insurance.  Tobaccos settlement funds could be used to provide them with the same subsidized health insurance coverage that their children receive.

Medicare Part B Coverage

Less than ten percent of the Medicaid enrollment in Pennsylvania are the so-called Dual Eligibles—low income seniors who enroll in Medicaid to cover the cost of the Medicare Part B premium.  These dually eligible Medicare and Medicaid beneficiaries are the extreme poor among the elderly, living in households with a family income about half the federal poverty standard.

Medicare Part B provides coverage for outpatient physician visits, physicals and medications.  As an enticement to enroll, several Medicare HMOs have provided “zero-premium” coverage for Medicare Part B, stimulating significant growth in Medicare managed care enrollment in our state.  And of course, we have the PACE and PACENET programs that provide some assistance for the elderly in terms of paying for prescriptions.

Nevertheless, there still remains a significant number of Pennsylvania seniors who need assistance in securing Medicare Part B coverage.  Tobacco Settlement funds could be used to assist them in purchasing this coverage.

Coverage for the Unemployed

Under federal law, when an individual separates from employment, they are eligible to purchase their former health insurance for up to 18 months, usually at a cost of 102% of the premium charged their former employer.  For a family, this could mean a monthly payment for health insurance in excess of $400.  For a family struggling to survive on unemployment compensation, making this payment and paying their mortgage, car loans, day care costs and food can be very difficult.  Perhaps this is why the Census Bureau has estimated that less than one in five Americans secure COBRA coverage when they become unemployed.

 Tobacco settlement money could be used to help individuals receiving unemployment insurance payments afford COBRA premiums.  Historically, the average duration on unemployment compensation has been about six months, so for most of the beneficiaries this would be transitional assistance.

Some portion of these funds should be set aside to provide assistance to these groups of Pennsylvanians in securing health insurance coverage, patterned after the successful children’s health insurance program.

A final suggestion, while not necessarily involving the use of tobacco settlement monies, could also help reduce the pool of uninsured Pennsylvanians.  Several states have required every student attending college in their state to either show evidence of health insurance coverage or purchase coverage while they are in school.  Coupled with an increase in the age for extended student coverage, this proposal could also reduce the number of uninsured.
 
 

Uncompensated  Charity Care

Providing affordable health insurance will significantly reduce the number of uninsured in Pennsylvania, but without universal coverage, we will not be able to provide coverage for each of the 1.2 million Pennsylvanians who do not have health insurance.  They will continue to be dependent on charity care.

Pennsylvania already provides funds to support hospitals and health systems that provide care for large volumes of the uninsured and the poor.  The Medicaid program currently provides over $60 million in state funds for so-called disproportionate share hospitals and another $30 million for critical access providers.  In addition, some element of the $40 plus million that the state spends on medical education is used to provide care for the poor and the uninsured.  All of these funds are matched by federal Medicaid money and supplement federal Medicare spending.  Therefore, we already have a substantial history of supporting hospital charity care.

But despite these efforts, hospital uncompensated care continues to grow, now amounting to over $790 million annually.

A portion of the tobacco settlement monies should be set aside to assist hospitals in providing uncompensated care.  Those hospitals and health systems that “spend” a significant percentage of their annual operating revenues to provide true charity care, should be eligible to be reimbursed by the state for a portion of that care.  There should be three stipulations about this aid.  First, it must be clear that the state funds would be for charity care, not bad debt or discounts on charges.  Second, physicians whose practices are “owned” by a hospital or health system would have to agree to accept patients regardless of their ability to pay.  And third, the health system would have to agree to locate outpatient clinics in areas serving high numbers or percentages of low income and uninsured patients.
 
 
 

PROMOTING HEALTH RESEARCH

Pennsylvania is a national leader in terms of medical education and research.  We have consistently been among the top three states in terms of federal research monies flowing to our teaching hospitals, academic health centers and cancer research institutes.

It is a small wonder then that health care is the single largest non-agriculture segment of our state economy—providing nearly 15% of the domestic state product and employing one of every seven workers.  Medical research is at the heart of the state’s pharmaceutical industry and our emerging biotech industry.

Investing tobacco settlement monies in medical research not only makes economic sense; it also could result in significant advances in treatments, therapies and medical technologies.  I believe there should be two targets for state investment.

First, as federal funds have constricted, some primary research activities have had their funding delayed.  A limited amount of tobacco settlement monies could be used to provide “bridge financing” allowing basic research to continue until federal funds become available.

Second, many academic health centers have reorganized their research operations to encourage technology transfer and to allow these institutions to share in the “intellectual property” created by researchers at their institutions.  Some portion of the tobacco settlement funds should be set aside to support transfer of research from the academic health center to private entrepreneurs, perhaps even allowing the Commonwealth to secure an equity interest in these investments.  In this way, the commitment of state funds could earn a return for the taxpayers, not only through the creation of new drugs, new medical technology and improvements in treatment, but also by reaping economic dividends as well.

STRENGTHENING THE PUBLIC HEALTH INFRASTRUCTURE

Unlike many other states, we don’t have local health departments in every county in Pennsylvania.  We don’t have much detail about regional health issues and we don’t have much detailed information about the health status of our communities.  We lack detailed geographic and demographic information about  health insurance coverage.  And the responsibility for public health education has fallen as much to charitable organizations as it has to the state and local health departments.

We have a unique opportunity with the tobacco settlement to bolster the public health infrastructure of our state.

 
Anti-Tobacco Efforts

It seems somewhat obvious to note that some portion of the tobacco settlement should be used to on anti-tobacco education, including anti-smoking and smoking cessation programs.

One of every four adult Pennsylvanians smoke, but one of every three high school students smokes.  And an estimated 16% of high school students use smokeless tobacco. We should focus a significant portion of our public health funds on youth tobacco use.  Grants should be given to schools to support anti-tobacco programs in school based health curricula.

The tobacco settlement agreement requires tobacco companies to support anti-smoking programs, including public service announcements.  The Health Department should supplement these efforts by sponsoring public service announcements targeting at-risk populations. Smoking is highest among the 25 to 44 age group, with women slightly more likely to smoke than men.  Individuals with lower educational attainment are more likely than those with post-high school education to smoke.  Consequently, the state should focus a public service campaign at these groups.

It has been estimated that smoking costs the Pennsylvania Medicaid program an estimated $605 million annually.  Smoking directly causes an estimated $4 billion in additional health care spending in our state.  We should use some of the tobacco settlement funds to support pilot smoking cessation programs.

And finally we should set aside some portion of these funds to support private anti-smoking programs.  For example, the Academy of Family Physicians supports a very successful “Tar Wars” program to discourage smoking in the elementary schools.  Challenge grants should be offered to encourage these efforts as well.

Health Status Assessment

The lack of county health departments has significantly hampered public health programs in the Commonwealth.  Some areas of the state have developed regional health assessments that provide useful data for public health officials.  The efforts of the Philadelphia Health Management Corporation in the southeastern corner of the state serve as a remarkable example for what could be done across the Commonwealth.

A number of charitable foundations and advocacy groups, recognizing the need for baseline health status information, have expressed interest in developing such a database.  The state could provide matching funds for a baseline health status assessment and periodic updates.  This assessment would profile the health concerns and needs of each area of the state, and also provide a more detailed picture of the uninsured.   Such information would be invaluable to policy makers, public health officials, health planners and health care providers.

Community Health Improvement

In may communities across the state, health care providers and insurers have joined together with community leaders to try to tackle particular local health care concerns.  By one estimate, there are nearly 100 community health improvement projects operating in Pennsylvania, each involving broad community leadership, brought together to tackle important local public health concerns.  The state could foster these efforts by setting aside a very small portion of the tobacco monies to match these local efforts.
 
 
 
 
 

Conclusion

Pennsylvania has an unprecedented opportunity with the tobacco settlement to address several significant gaps in our health care system.  Each of the proposals I have outlined above would improve the delivery of care in our state and ultimately the health of Pennsylvanians.

And they can all be accomplished with the amount of funds that we annually can expect from the settlement.

I believe that these programs and initiatives merit serious consideration by the Administration.  I look forward to working with the Administration in crafting a series of programs to use Pennsylvania’s share of the tobacco settlement funds that will improve the health of all Pennsylvanians and promote access to affordable, quality health care services.