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Excerpted From: Maria O'Brien Hylton, The Economics and Politics of Emergency Health Care for the Poor: The Patient Dumping Dilemma, 1992 Brigham Young University Law Review 971 (1992) (156 Footnotes) (Full Document)

MariaOBrienHylton copyClaudia Thomas was nineteen years old and eight months pregnant. She was unemployed and had a two-year-old son, Eric, at home. Her husband, Steven, worked periodically, but none of his jobs offered health benefits for him, let alone Claudia and the kids. For this reason, Claudia had not seen a doctor during the entire length of her pregnancy.

One morning Claudia began having cramps and nausea that seemed worse than usual. By noon she knew that something was wrong. She called her mother to ask her to watch Eric while she went to the clinic, but her mother was not available. She decided to wait until evening when Steven came home. By the time Steven arrived her contractions were painful, even though she was a month away from her due date.

Claudia was bleeding and went to the emergency room of a nearby private hospital. Before she could see a doctor, she was asked to fill out several forms and answer questions about her insurance coverage and about her medical treatment during the pregnancy. Once it became obvious to the admitting nurse that Claudia did not have health insurance, another nurse was called in. She told Claudia that she would be “better off” at the county hospital, which was some 15 miles distant. Claudia demanded to see a doctor, saying that something was wrong and she was worried about the baby.

Finally, she was led back and told to wait for the doctor. After 15 minutes, Claudia saw a doctor who told her that she would not be admitted because she had not dilated sufficiently. However, he decided to run some tests to make sure the baby was all right. Although the tests suggested that the baby was experiencing some distress, the doctor assured Claudia that there was plenty of time before the baby would be born, and that the best place, for a case like hers, was County Hospital. Despite Claudia's protests, the doctor refused to admit her. Reluctantly, she departed for County Hospital by taxi. On the way to the hospital she delivered a premature baby girl in the taxi. The infant died shortly thereafter of cardiac and respiratory complications. The doctor who treated her at County Hospital believes that if she had been admitted to the private hospital and received the proper care the baby would have survived. Claudia believes that she would have been admitted to the private institution had she had medical insurance or other proof of ability to pay.

As the numbers of uninsured mount because of job dislocations, exhaustion of benefits, and unaffordably high premiums, the incidence of “dumping” by private hospitals is, predictably, on the rise. Dumping occurs when a hospital, in violation of federal or state law, transfers an emergency patient to another (usually public) hospital or simply refuses any treatment based on the patient's inability to pay. In addition to the completely uninsured, favorite dumping targets include Medicare and Medicaid patients, AIDS patients, and cancer patients whose therapy may cost more than the maximum reimbursement under private insurance.

Dumping is merely a part of what is commonly referred to as the “health care crisis” which, in turn, is really a crisis involving two related, but distinct, issues: access and cost. There are two common themes to the complaints about health care voiced by consumers, insurers, providers, and politicians. These are (1) its high (and growing) cost and (2) the fact that millions have no access to good, consistent care because they are uninsured. Dumping is a blatant example of the difficulties the under- and uninsured face in securing access to health care.

All dumped patients represent potentially significant, uncompensated costs to the hospital that decides to refuse treatment. And, as health care costs have risen the problem has become acute. While the incessant rise in health care costs has been variously blamed on ever-changing, expensive technologies, malpractice liability, an increasingly older population, and physician greed, it has been suggested that many of the current problems can be traced to Reagan-era developments.

It is important to keep in mind, though, that dumping is not a new phenomenon. As Emily Friedman has noted:

[A] historian at the University of Pennsylvania, Philadelphia, points out that

in the period from 1850 to 1870, the scandal of which voluntary hospitals were most afraid was that resulting from the death of a patient in an ambulance during a transfer to a municipal hospital. The newspapers would reveal the transfer, and because everyone assumed that private hospitals had public responsibilities, it would be seen as inhumane. But from the beginning of the nineteenth century, when voluntary hospitals were first established, they had the ability to define which patients they did not want to treat: the chronic and incurable, the “morally unworthy,” alcoholics, patients with venereal disease. Many of them would not take children, either, or pregnant women seeking hospital rather than home care, because they were usually prostitutes. It has been a strange symbiosis between the public and private sectors.

Thus, private hospitals in the United States have a long tradition of avoiding, when they can, economically undesirable patients. Given the existence of taxpayer-supported public hospitals whose principal task is to care for public patients at public expense, some have suggested that public hospitals are the appropriate places for the poor:

[W]e see many patients who self-refer, because they know they will be treated here if they do not have insurance. We also receive referrals from physicians' offices of patients who do not have insurance. I do not consider either of these to be “dumping.” That's what we receive tax support for; that's part of our mission.

In the early 1980s many states tightened up eligibility requirements for Medicaid in response to federal cuts and dramatic increases in the cost of running the program. However, by 1983, when Medicare began to curtail payments as well, finding a solution to the dumping problem took on new urgency. In that year Congress passed Social Security amendments creating the diagnostic related group (DRG) reimbursement system, which pays providers a predetermined rate for 470 diagnostic classifications. DRGs do not pay the provider an amount directly related to the actual cost of treating a particular patient; the provider is reimbursed a set amount based on the DRG which covers the patient's condition. If the provider keeps costs low, the portion of the reimbursement which is not actually expended on the patient represents pure profit. Thus, providers have an economic incentive to undertreat Medicare patients in order to make a windfall. This incentive becomes more powerful as the percentage of a hospital's completely unreimbursable care rises, making Medicare patients ever more likely to be undertreated or treated quickly and discharged early so that the provider may keep costs below the DRG reimbursement amount.

In the early 1980s private health insurers began to devise methods for curtailing price increases. The proliferation of Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) were part of this effort. Like the proponents of DRGs, supporters of HMOs argued that fee-for-service payment schemes were largely responsible for the unrelenting inflation in health care costs. HMOs contract with providers on a prepaid basis and guarantee a variety of services to subscribers who generally make periodic, fixed payments for comprehensive health services.

PPOs enter into contractual arrangements with employers or insurance companies and health care providers. The PPOs operate on a fee-for-service basis, but providers prenegotiate rates with insurance companies or employers contracting for their services.

The combined effect of cost cutting and management in the 1980s on the part of Medicaid, Medicare, and private insurers has made it virtually impossible for hospitals to pass on the costs of indigent, unreimbursable care to other, paying patients. Not surprisingly then, the 1980s saw a huge increase in patient dumping as hospitals scrambled to avoid the most undesirable of all emergency patients: those with serious, expensive-to-treat emergency conditions with no prospect for payment.

This article examines the patient dumping phenomenon and explains why the federal legislation that was supposed to end dumping of emergency patients has failed.

Section II reviews the federal and state regulatory frameworks which ostensibly prohibit all emergency dumping.

Section III describes the most important characteristics of the market for health insurance and explains the tremendous reluctance of hospital providers to deal with uninsured consumers. This section also focuses on a troubling question. Why is it that complaints about the present health care system consistently raise two seemingly contradictory issues: first, that we overspend on health care; and second, that the health needs of many are not being met? The answer, I conclude, is that in spite (and because) of well-intentioned but excessive regulation of the health insurance market, access is unnecessarily limited. I argue that the elimination of burdensome regulations would actually decrease the number of uninsured and ease the dumping problem.

Section IV examines several important dumping cases in light of the model presented in Section III. These narratives demonstrate that dumping is a serious problem that has proven fatal on many occasions. In addition, there is a review of the incentives that encourage hospitals to dump and a suggestion that the total elimination of dumping is not politically feasible and ought to be abandoned. Absent a scheme of universal health insurance (which would presumably eliminate the large pool of uninsured), an interim solution is needed. The most popular solution, which proposes to increase both the penalties and the likelihood of detection for violators of the federal antidumping statute, is unworkable and potentially very harmful. I propose first to reduce the pool of uninsured by encouraging private insurers to do business with the profitable segments of this market; those who remain in the pool should receive a subsidy from the state to pay for health insurance coverage, the contours of which would be politically determined.

Section V contains a summary of the arguments presented and a conclusion. This article does not purport to evaluate ways in which all-inclusive health care services could be provided to the working and nonworking poor. Nor is this a paper that proposes reform of the Medicaid program. The focus here is not on cost, but on access, and specifically access to emergency care. To the extent that the demand for emergency room services can be decreased via the provision of cost-effective preventive care, the issues discussed here obviously affect the broader questions of comprehensive health care reform.

[. . .]

As stories like Mrs. Rivera's make clear, patient dumping is a very serious problem that endangers the lives of many (mostly poor) people on a regular basis. Uninsured women in labor (and their unborn children) and others with health problems that may cause unexpected emergency situations are at the most risk. However, providers have also been known to dump patients whose insurance has run out or is otherwise inadequate. A profile of the uninsured is not exclusively a picture of the unemployed because millions of uninsured individuals work full time or are supported by someone who does. Thus, the accidental nexus between employment and health insurance coverage does not entirely explain the crisis of noncoverage.

In spite of evidence to the contrary, Congress has treated the problem of patient dumping as one readily amenable to regulation via the political process. This is simply not true, especially given the powerful economic incentives to dump and the relatively low probability of detection that providers face. Congress made it much more difficult in the 1980s for hospitals to pass on the cost of indigent patient care to other patients, and the outcome was entirely predictable: hospitals began to provide less uncompensated care and to foist these patients onto public institutions whenever possible. Congress's weak and ineffective response to increased dumping suggests either unimaginable naivete or a desire to appear to be reacting to the crisis, all the while permitting the forces it set in motion to continue to crush the uninsured. The entire scenario reminds one of a parent who, with a wink and a nod, sternly orders a child not to take any cookies from the open jar the parent has placed just under the child's nose.

A straightforward assessment of the market for health insurance and initiatives that will enable as many people as possible to purchase coverage is required. One obvious tactic is to discourage the fifty states from dictating the terms of private insurance contracts. This should enable insurers to offer products that meet the needs of the working poor, whose demand for exotic fertility treatments or prosthetic devices may be limited. As for those who would still remain in the pool of uninsured, a direct subsidy that would enable the members of the pool to obtain coverage is most attractive.

There is as yet in this country no consensus over the nature of health care qua consumer product, which consensus will be necessary before a move toward universal health insurance is possible. In the meantime, which may be a long time, the needs of the uninsured (for both emergency and routine care) cry out for attention. The answer is not to insist that already stressed providers give away an unlimited amount of uncompensated care; rather, the solution lies in focusing on ways in which the numbers of uninsured can be reduced and in subsidizing coverage for those who cannot obtain it at any price. 

Visiting Associate Professor of Law, University of Chicago. A.B. Harvard, 1982; J.D. Yale, 1985.