THE IMPACT OF ENTITLEMENT PROGRAMS ON RURAL HEALTH

The entitlement programs are among the most misunderstood parts of the federal budget. For example, many people are surprised to learn that the "welfare" everyone is so anxious to reform is only 1 percent of the federal budget. The correct name is the Family Support Program, of which the only eligible recipients are low-income families with children. The Commodity Credit Corporation, which provides income support to farm families, has a budget that is $500 million dollars more than the Aid to Families with Dependent Children "welfare" program.

WHAT ARE THE ENTITLEMENTS?

"The Largest Entitlement Programs," CRS Report for Congress, by Kenneth Cahill was released April 15, 1993. This report is a concise, six-page, objective description of the entitlement programs. In an effort to briefly summarize the report, the following data is presented.

Federal Outlays by Budget Enforcement Act Category-Fiscal Year 1993

(All percents are of the total mandatory and discretionary budget items.)

Mandatory		Discretionary
Entitlements	53.0%	Defense	20.2%
Other Mandatory	9.4%	Domestic	16.0%
		International	1.4%
TOTAL	62.0%		38.0%

DEFINITION OF SOCIAL WELFARE PROGRAMS

There are two categories of social welfare programs.

Work Related	Means Testing
70% of all entitlements mandatory 37% total federal outlays Eligibility and benefits are determined by past work experience and are not dependent on having a low income Social security, military retirement, unemployment compensation, Medicare, civilian retirement, veterans compensation	20% of all entitlements and mandatory 11% total federal outlays Eligibility and income determined in part by having low income Medicaid, family support, supplemental security income (primarily disability), food stamps, veterans pensions

NINETEEN LARGEST ENTITLEMENT PROGRAMS

Following are the 19 largest federal entitlement programs listed starting with the largest program (no. 1).

1. Social Security
2. Medicare
3. Grants to states: Medicaid*
4. Civil Service retirement and disability fund
5. Unemployment compensation
6. Military retirement fund
7. Food stamps
8. Supplemental security income
9. Commodity Credit Corporation (farm income support)
10. Veterans compensation and pensions
11. Family support payments*
12. Payment where earned income credit exceeds liability for tax
13. State child nutrition programs*
14. Guaranteed student loans
15. Railroad retirement
16. Payment for annuitants, employees health benefits
17. Social services block grant*
18. Payments to states for foster care and adoption assistance*
19. Rehabilitation services and disability research

* Programs where the money goes directly to the states.

SICK PEOPLE ACCOUNT FOR MOST HEALTH CARE SPENDING

There is a dangerous myth in the United States that blames the increases in health care spending on the fact that because people have health insurance and are not wise consumers of care, they overuse services driving up the amounts spent on health care. In truth, numerous studies show that very sick people use most of the health resources and it is increases in the costs of these services-medical inflation-that is driving up health care costs, not individual behavior.

What does Medicaid Spending Buy?

A report published in Spring 1995 by the Kaiser Commission on the Future of Medicaid, Health Needs and Medicaid Financing, reported that although three-quarters of Medicaid recipients are low-income families and children, two-thirds of the spending is for the elderly and disabled. Following are examples of where Medicaid funds are going-the percentages listed total more than 100 because some recipients receive benefits from more than one category.

• 39 percent for the blind and people with disabilities so severe that they are unable to work for at least 12 months (determination assessed by a rigorous screening procedure).
• 34 percent of Medicaid spending is for hospital care.
• 34 percent of all Medicaid spending is for long-term or other institutionalized care. One-half of all skilled-nursing facilities are totally dependent on Medicaid revenues. Domiciliary expenses add to the costs of institutionalization, not only health services.
• 19 percent for children (50 percent of beneficiaries).
• 14 percent for pregnant women and parents.

Fewer Than One-half of the Most Expensive Patients are Elderly

Another myth is that the elderly drive up the costs of the health care system and that we should limit or ration care to the elderly. The reality is that most health care spending is used by a very small part of the population-the seriously injured or very ill. Following are findings of a study conducted by the Agency for Health Care Policy and Research (AHCPR) that looks at 60 years of medical expenditures.

• 1 percent of the population has always been responsible for a large percentage of health care expenditures. That 1 percent of the population's cost for several years is listed below.

1928 No data

1970 26 percent of total expenditures

1987 30 percent of total expenditures

• Of this top 1 percent, less than one-half are older than 65 years despite the tremendous increase in the elderly proportion of the population since 1928. The percentage of total health care expenditures are listed below.

	1928	1960	1970	1987
Top 5% of Health Care Users	52%	43%	50%	58%
Next 45% of Users	41%	53%	46%	39%
Remaining 50% of Users	7%	4%	4%	3%

* Source: Montheit, et al., Health Affairs, Spring 1993.

THE DISPROPORTIONATE IMPACT OF ENTITLEMENT CUTS ON RURAL COMMUNITIES

Any and all entitlement cuts will hurt rural communities for the following reasons.

• Higher percentage of elderly--the recipients of most of the entitlements:
  • Social Security
  • SSI
  • Medicare
  • Rehabilitation services
  • Retirements: military, veteran, civilian, railroad
• Families in farming or ranching will lose large parts of their incomes when the Commodity Credit Corporation (farm income support) is cut. Many will discontinue health insurance coverage, possibly in even greater numbers than during the "farm crisis" of the 1980s.
• Earned Income Credit is a middle class tax cut enacted in 1993. Cutting this will hurt rural families, especially those with two wage earners who currently meet the income eligibility for a cash payment (refundable tax credit).

Rural health care providers, especially hospitals, are more dependent on payments from entitlement programs than urban providers. It is common for rural hospitals to be dependent on Medicare for up to 70 percent of their incomes.

THE NATIONAL RURAL HEALTH ASSOCIATION POSITION ON ENTITLEMENTS

The National Rural Health Association will maintain a flexible position on entitlements so that it can negotiate within the current political climate. However, because of the disproportionate impact of any cutbacks in rural America, the association will respond quickly after even minor adjustments to the entitlement programs are proposed. Any slower response to entitlement legislation would not serve as advocacy for the association's membership.

Following are policy positions accepted by the National Rural Health Association.

• Actively work to continue current efforts to ensure rural people access to quality health care by strengthening the rural health care infrastructure, including facilities, work force development and deployment, access to technology, and equitable reimbursement.
• Advocate for reducing the costs of health care, controlling medical inflation, and capping health care administrative costs prior to any reductions in health care services or further limitations in eligibility.
• Work to maintain the integrity of entitlement programs.
• In the absence of an effective alternative to Medicaid and Medicare, the level of services provided by these entitlement programs should not be reduced.
• Retain reasonable cost-based (FQHC and RHC), disproportionate share (DSH), and EACH/RPCH, or replace them with other reimbursement methodologies only when they are designed to ensure access to health care and adequate revenue to maintain and protect the fragile rural health care system.