II. CIVIL RIGHTS & FEDERAL FUNDING: THE ROLE OF HEALTH CARE FINANCING IN EXACERBATING RACIAL DISPARITIES

Brietta R. Clark, Hospital Flight from Minority Communities: How Our Existing Civil Rights Framework Fosters Racial Inequality in Healthcare, 9 DePaul Journal of Health Care Law 1023-1100 (2005) (270 Footnotes omitted).

[I]t is possible to view hospital closings and relocations as partial symptoms, first of deficiencies in physician availability and distribution (both geographically and by specialty) and second, of an underfunding of health services of the poor.... But we need to ask the questions, Why wasn't there enough money? Why replace the hospital? Why did occupancy rates fall? Why was the physical plan outdated? Why weren't there enough doctors?   The primary reason Title VI was viewed by patients' advocates and civil rights lawyers as a powerful weapon to deal with the problems of health care access was because of the extensive federal funding reaching into almost every aspect of health care delivery. The government's direct construction and operations funding to hospitals, indirect subsidization of health care facilities via Medicare and Medicaid, and tax subsidies for nonprofit health care facilities gave the government expansive reach into both the private and public mechanisms for health care delivery. In theory, the government could *1045 regulate almost every type of provider, from physicians to nursing homes to private and public hospitals. This also gave it the power to oversee and challenge any discriminatory allocation of resources by states and local government planning of health care facilities. Thus, in order to critique the successes and failures of civil rights law, we must consider the patterns of funding and government activity in this area.

A. Overview of the Healthcare System

In order to understand the critical role federal funding plays in determining equitable access to hospital care, one must be familiar with the structure of our healthcare system and the private/public patchwork of health insurers and providers used to provide care. It is helpful to think of our health care delivery system in terms of two components. One is the direct provision of care through the construction of health care facilities and employment of professionals, such as physicians and nurses. The other is through an insurance system that guarantees reimbursement to health care providers. Both are critical to ensuring access to care. Without insurance, most individuals are practically barred from accessing all but the most emergent care because of extraordinary cost. If health care facilities and providers are not distributed equitably, entire communities may be foreclosed from accessing care in a timely manner.

There is no national health insurance system in this country and no cognizable legal duty of the federal government to provide health care for all citizens.   Instead there is a patchwork of private and public health care, as well as, limited local and federal mandates to provide health care for certain groups of people. The U.S. health delivery system relies heavily on private insurance that people are expected to obtain through their employment, school, individually, or some other association.   Many people are uninsured, either because they are not eligible for insurance, employers do not offer it, or the insurance is prohibitively expensive.   For people who cannot obtain private health insurance, they must rely on the public “safety net.”

There are significant gaps within the health care safety net because of this patchwork of private and public health care delivery. *1046 Much of the role of direct care provision and the doling out of resources is left to the states. Many states have enacted laws that obligate local entities to ensure health care access for its indigent citizens, although such laws typically do not define the minimum level of care required nor do they require local governments to provide this care directly.   While public hospitals are one means to satisfy this obligation, courts allow local governments to rely heavily on private health care providers, facilities, and managed care plans to provide the requisite care.   Gaps remain because while public hospitals have a duty to provide care regardless of one's ability to pay, private providers, such as hospitals, nursing homes, outpatient centers, health clinics, and physicians, do not.   There are limited exceptions. For example, federal law requires hospitals that participate in the Medicare program and have an emergency room to provide a screening and stabilizing treatment for anyone who comes to the emergency room, regardless of their insurance status or ability to pay.   However, this law does not create a duty to provide nonemergency care. Many hospitals are also tax-exempt, which means they receive state and federal tax benefits in exchange for some community benefit or charitable purpose they serve. Although this federal charitable requirement has been interpreted to embody a free care requirement, this interpretation has been significantly undermined.   States vary in *1047 the degree to which they are willing to define and enforce a free care requirement as a condition of tax-exempt status. 

Although the federal government relies heavily on state administration, planning, and design of health care delivery, it is extensively involved in health care delivery through its subsidization of states' health care programs, direct funding and tax subsidies to private and public hospitals, and through limited social insurance programs that help certain categories of the extremely poor, disabled, and elderly.   Thus, the federal government is in fact a powerful financial partner of the states and private health care providers. Through its spending power, the government has the means and the obligation to ensure that recipients of federal funding and subsidies provide care in a nondiscriminatory manner. However, a canvass of the system of health care financing reveals that the government has created a health care financing system that exacerbates racial disparities, while simultaneously abdicating its legal obligation to ensure that funds are distributed equitably. To illustrate the government's active and passive role in fostering racial disparities, I will use two examples: the federal government's decisions in structuring and financing the Medicare and Medicaid programs and its creation and administration of Hill-Burton funding to hospitals.

B. Social Insurance: The Medicare & Medicaid Programs

The Medicare and Medicaid programs were enacted in 1965 and 1967, respectively. Enactment of Medicare and Medicaid is credited with helping to transform the U.S. health care system by encouraging access for people who otherwise were not eligible for private insurance.   Medicare, in particular, is seen as playing a critical role in the movement to eliminate racial segregation through Title VI. In fact, the threat of exclusion from Medicare was initially used to force Title VI compliance, enabling the successful desegregation of more than 1000 *1048 hospitals in the first few years of the Act's life.   Despite this promising start, the government subsequently made choices that undermined the promise of both programs for racial minorities.

On June 30, 1966 President Johnson announced that Medicare would begin the next day and “for the first time, nearly every older American will receive hospital care - not as an act of charity, but as the insured right of a senior citizen.”   What was not acknowledged, however, was that because eligibility for Medicare was tied to payment into the social security program, some older and disabled workers were excluded, especially minorities.   This is because many jobs that tended to be disproportionately populated by minorities, such as cleaning workers, did not pay into the social security system. Moreover, the pervasive history of employment discrimination against minorities effectively excluded them from many of the jobs that would have provided these benefits.   By 1976, the racial differences in enrollment of minorities and nonminorities narrowed significantly,   but racial and ethnic disparities in access to care persist.   One reason for the disparities is that Medicare beneficiaries remain liable for significant out-of-pocket costs in the form of coinsurance, deductibles, *1049 and excluded services. To the extent African-Americans are more likely to have lower incomes, such cost sharing acts as a barrier to necessary health care. 

Medicaid helped fill in some of the gaps, however the structure and financing of the Medicaid program presented other problems. Medicaid eligibility was limited to only certain categories of persons, like pregnant women, children, and the disabled, and only the extremely poor of these individuals.   The consequences of the eligibility lines drawn for Medicare and Medicaid meant that minorities, the working poor, men and single women tended to be left out of the system.   These groups were expected to obtain their own insurance through employment, school, or the private insurance market, despite the fact that these areas were largely unregulated and many employees were either ineligible due to work status or were effectively priced out of the market because of exorbitant insurance rates. Once again, African-Americans and Latinos were more likely than whites to fall through these gaps due to unemployment or employment in jobs that did not offer insurance. 

There were also significant differences in the administration and financing of Medicare and Medicaid that fostered racial inequality. Medicare is a federal program that has typically been pretty easy for patients and providers to negotiate.   Coverage determinations and provider reimbursements have generally been timely and health care providers have viewed Medicare patients as valuable clients from a business perspective.   Medicaid, on the other hand, is a joint federal/state program in which the federal government delegates program administration and benefit determination to the states, with little or no federal oversight.   In practice, Medicaid has been a bureaucratic nightmare for patients and providers alike. Because *1050 Medicaid eligibility depends on financial need, it was initially conceived and structured as an extension of the public welfare system - with overburdened and inexperienced welfare workers responsible for health plan administration.   This resulted in inaccurate and/or delayed eligibility and coverage determinations that often prevented or discouraged patients from getting needed services.   In fact, some states' procedures were so confusing and arbitrary, that they were forced, through litigation, to reform.  

Medicare has also historically been funded much more generously than Medicaid. Medicaid reimbursement is universally seen as woefully inadequate, and its financing is always in danger.   This coupled with the structural difficulties in program administration create powerful incentives for health care providers to refuse to treat or severely limit their treatment of Medicaid patients, which disproportionately affects minorities.   These problems have also impacted the quality of health care delivered to Medicaid versus Medicare beneficiaries in significant ways. As more physicians and hospitals limited their Medicaid and indigent patients through exclusions or by leaving communities with higher rates of Medicaid patients, only a limited pool of providers willing to serve Medicaid patients remain.   This often results in substandard providers delivering the bulk of care to Medicaid populations and creates a second-class health care system for the Medicaid and indigent population. 

*1051 Despite the fact that the gaps in health access between different races and classes were narrowed as a result of Title VI and Medicare, it should not have been surprising that within two years of Title VI enactment, “racial divisions were widening again.”   Numerous health advocates and policy analysts have attributed this fostering of the racial divide in large part to the problems of the Medicaid program.   In essence, the government undermined its own tools for change by creating a two-tiered system of care and by creating categorical exclusions that would clearly harm minorities disproportionately.

C. Hill-Burton Funding

In 1946, there was a push by the administration and several legislators for a national insurance system.   Although this was not successful, a much more limited program of federal assistance in health care was provided through the Hospital Survey and Construction Act, also known as the Hill-Burton Act.   Through this Act, the federal government supported states and private hospitals by subsidizing hospital construction and expansion. Significant funding was distributed to hospitals throughout the 1940s-60s as a result. 

At the insistence of those who pushed for a more comprehensive insurance program, Congress attached two conditions to the receipt of Hill-Burton funds. The first was an anti-discrimination clause (also known as the community service requirement) which provided that hospitals agree to make their facilities “available to all persons residing in the territorial area of the applicant without discrimination on account of race, creed or color.”   The second *1052 requirement, known as the free care requirement, provided that the hospital make available “a reasonable volume of hospital services to persons unable to pay” with an exception provided in cases where it is not financially feasible.   Once again, despite apparent promise, the government undermined its own purported commitment to improving access to health care for everyone.

The most obvious example of this is found in the text of the original legislation. The government expressly sanctioned racial segregation by recipients of Hill-Burton funds by including a qualifying clause in the antidiscrimination provision that permitted hospitals to provide “separate but equal” facilities for nonwhites.   Ultimately, this provision was challenged in 1963 and found unconstitutional in Simkins v. Cone,   commonly referred to as the Brown of health care.   The facts of Simkins also illustrate the extent to which significant public funding had already been disseminated to hospitals that overtly excluded or segregated minorities. In Simkins, plaintiffs brought a constitutional challenge against two hospitals that denied staff privileges to black physicians and refused to treat black patients on account of their race.   The facts revealed that the hospitals received significant government funding from their participation in the *1053 Hill-Burton program.   The government had allocated over $1 million in Hill-Burton funding to one hospital, which constituted approximately 15% of its construction expenses, and almost $2 million dollars to the other, which constituted about 50% of the cost of its construction projects.   The court held first that there was sufficient state action because of the intermeshing of state and federal programs used to allocate resources for the promotion of health care access.   In light of this finding of state action, the court held that the separate but equal provision of Hill-Burton violated the equal protection clause, and thus directed the district court to enjoin the defendant hospitals from further discrimination against black patients and physicians. 

Although both Simkins and Title VI prohibited race discrimination, minorities were still being excluded or segregated from whites on economic grounds. The link between race and economic discrimination was clear as early as the 1950s in those states that enacted antidiscrimination laws that prohibited the exclusion or segregation of minorities by hospitals. For hospitals that wanted to avoid Title VI or state antidiscrimination law prohibitions, economic proxies were used to exclude minorities, sometimes quite transparently. For example, many hospitals required preadmission deposits that effectively excluded Medicaid and uninsured patients, but applied the deposits selectively to minorities.   In other cases, hospitals constructed private rooms or wings of hospitals to separate the privately insured and affluent patients from those who were indigent or received Medicaid.   This had the visible effect of, and in some cases *1054 was intended to, create a de facto segregation of black and white patients within hospitals. 

Thus despite Title VI, the Hill-Burton antidiscrimination and free care mandates were critical for preventing race discrimination by hospitals. The nondiscrimination and free care requirements provided a powerful tool for combating race discrimination disguised by economic proxies because it could be used to prevent the exclusion or segregation of Medicaid and uninsured recipients without having to prove a race-based motive. Indeed, in light of the federal government's role in structuring Medicaid and Medicare and its early discriminatory allocation of Hill-Burton funding, it had a legal and ethical obligation to use these requirements aggressively to ensure the equitable distribution of hospital resources. Moreover, the legacy of de jure discrimination against minorities in all sectors of the economy meant that minorities were overrepresented among the indigent and Medicaid populations, and economic proxies used to disguise intentional race discrimination were pervasive. Nonetheless, the government abdicated its obligation to allocate funding equitably and to ensure that the recipients of these funds complied with the free care and nondiscrimination requirements. For example, the government continued to allocate public funds to facilities that discriminated against minorities, overtly and covertly, forcing advocates to seek help from the courts.   In fact, the government ignored the free care provision altogether until civil rights advocates discovered it in the 1970s. 

In 1970, in Cook v. Ochsner,   a class action suit was brought against ten New Orleans hospitals that received Hill-Burton funding. The plaintiffs were Medicaid recipients and minority residents whose *1055 incomes were below the recognized poverty level.   The defendants included several hospitals that received federal Hill-Burton funding on the condition that they would provide a reasonable volume of free services to the indigent and make their services available to all in the community, but had an explicit policy of refusing or discouraging treatment of Medicaid patients.   The claim was later amended to add the U.S. Secretary of Health, Education, and Welfare and the Louisiana Director of State Department of Hospitals for abdication of their legal obligations to ensure compliance under the Hill-Burton Act.   Originally, plaintiffs sought to enjoin this discrimination under Title VI because of the racial effects of these policies, but the Title VI claim was eventually severed from the Hill-Burton claim.   The federal district ultimately ruled that the community service or nondiscrimination obligation prohibited hospitals from discriminating against Medicaid patients and forced the federal government to finally issue regulations regarding the free care requirement.   While this provided some guidance to hospitals and gave advocates a stronger tool with which to police noncomplying hospitals, the government never aggressively enforced these requirements.

In sum, the government, through policy choices about the structure and administration of federal funding programs for health care, effectively undermined its apparent commitment to racial equality in health care access in several ways.