San Francisco’s universal health plan reaches tens of thousands, but rests on unstable funding

Four years ago, San Francisco launched a grand experiment, becoming the first city in the nation to offer comprehensive health care to its growing ranks of uninsured.

Stitching together two-dozen neighborhood health clinics and an array of hospitals, the city bet that two reforms — emphasis on primary care and a common electronic enrollment system — could improve outcomes and buffer the city against soaring health care costs.

By many measures, San Francisco’s effort to provide universal health care has been a huge success and has won national accolades. The initiative, Healthy San Francisco, has over time treated more than 100,000 city residents. Many who went for years without health insurance now receive the kind of preventive and specialty care usually associated with private insurance.

But the city’s grand plan has not solved the central problem dogging health care across the country: figuring out who pays for it.

While the Department of Public Health has kept its own spending on the program at under $100 million a year — about the same amount it spent on indigent care before Healthy San Francisco’s 2007 launch — it has spread an additional $78 million in costs to businesses, patients, the federal government and the health care providers themselves.

The program relies on ample, but not perpetual, federal grants for health innovation, tied to preparing for President Obama’s health initiatives that may be derailed by the U.S. Supreme Court next spring or a Republican administration after 2012. As national political and economic winds change, the city may not see the soft landing it expected from the federal reforms in the next few years.

With low payments from patients and declining dollars from employers under a new health care spending requirement, the plan’s local financing remains a challenge. Especially when the city has faced deficits of more than $300 million for each of the last three years.

Participating nonprofit community clinics in the network have been shouldering part of the financial burden. That may be a problem in an economy where health care costs are rising twice as fast as inflation. Some clinics say they are tapped out, and the $114 per-patient per-year reimbursement they get from Healthy San Francisco doesn’t come anywhere close to covering costs.

“The program is very, very important,” said Karen Hill, administrative director of Glide Health Services, a large, busy nonprofit community health clinic in the Tenderloin whose base of 3,000 patients includes 1,500 Healthy San Francisco members. “But I think we should recognize that it does not pay for the care of the population.”

At last count, Healthy San Francisco covers 54,348 patients, about two-thirds of the estimated 82,000 San Francisco adults who lack insurance, according to a September report from Mathematica Policy Research of Princeton, New Jersey. (Estimates range widely from 64,000 to 90,000 uninsured adults aged 18 to 64.)

In a survey of patient satisfaction, 94 percent said they were satisfied with the medical care they received through the program.

But clinic directors say that while the program has been great for patients, the clinics themselves struggle to deliver care to ever-growing numbers of people. Some clinics have seen their patient base grow by a third since 2007.

Healthy San Francisco has laudable goals, said Ricardo Alvarez, medical director of the Mission Neighborhood Health Center, and “has expanded care to a vulnerable underserved population.”

But for clinics to make it work, Alvarez said, “it is challenging financially.”

Several clinics, such as Lyon-Martin Health Services in Hayes Valley, have stopped taking more Healthy San Francisco patients. The center was already under financial stress this year, and announced earlier this year it had been on the brink of bankruptcy.

So as the Obama administration prepares to roll out federal health reform by 2014, cities and states look to San Francisco for proof of concept: They're finding the plan here offers ingredients for success, but not a complete answer.

“Healthy San Francisco is a model for health care delivery but not for payment,” said Stephen Shortell, the Dean of the University of California-Berkeley’s School of Public Health.

But Alvarez, of the Mission clinic, said San Francisco had little choice but to innovate.

“I think the fact that Healthy San Francisco exists is, in part, a local response to a complex problem,” he said. “The fact that we don’t have a comprehensive national healthcare program means certain localities will attempt to find their own solutions.”

Ahead of the curve

Healthy San Francisco has scored some nationally recognized successes. In drawing two-thirds of the city’s uninsured into its care, it has shrunk the number of people without some form of health care to 3 percent of the city’s population.

The program is built around a “patient-centered” primary care model that is in vogue in medical reform circles. New enrollees are primarily very poor, though any city resident making less than 500 percent of the poverty level and without proper insurance for three months can apply.

Participants choose one of 35 health clinics around the city as their “medical home.” At the clinic, they are assigned a team of providers: a doctor, a nurse practitioner and assistants who handle their visits and coordinate referrals to specialists or for hospitalization.

The theory is that by offering patients a regular doctor or medical team who might get to know them, in a place that is familiar, they will seek care before problems become acute. Numerous studies have shown that preventive care such as mammograms and cholesterol checks can detect early signs of disease before they become more difficult and costly to treat. Uninsured patients often put off tests and preventive care to avoid out-of-pocket expenses.

Shifting to the patient-centered model has also dramatically cut the use of city emergency rooms for routine care by the program’s participants. Proponents say that in the long run emergency room “diversion” — catching illness before it becomes acute — has the potential to save the city millions of dollars a year because emergency care is inevitably more expensive.

Keeping better track

Healthy San Francisco dramatically improves patient tracking by using a citywide database. Each patient’s enrollment and eligibility status is entered into one place visible to the entire network of providers. Now, a patient does not need to be re-enrolled if she needs hospitalization or to see a specialist elsewhere. If she shows up at a different clinic, she will be redirected to her home clinic. Administrators say this cuts down on duplicative care and wasted time. Patients used to hop from clinic to clinic, often carrying their own eligibility documents with them.

“We do believe it is a model,” said Tangerine Brigham, director of Healthy San Francisco and a deputy director of the Department of Health. “The medical home, the use of one standardized eligibility and enrollment system, getting all providers that are caring for this population to focus on one network, are things that should happen.”

Roland Pickens, the chief operating officer of San Francisco General Hospital — the county hospital where three-quarters of Healthy San Francisco patients go if they need hospitalization — said the program “has been a good change,” bolstering primary care, resulting in 30 percent fewer visits to the emergency room by uninsured adults and reducing the time and money spent on administrative tasks.

Alvarez relates the story of a woman named Isabel (he could not provide her last name due to medical privacy issues) who came to Mission Neighborhood Health Center with a psychotic disorder, uncontrolled diabetes and eye trouble. A behavioral health specialist calmed her down, and a physician tested her blood sugars, prescribed diabetes medication and gave her an appointment to see an ophthalmologist.

Because she was enrolled in Healthy San Francisco, all this cost the clinic a few hundred dollars, of which the city was billed $114. Had she gone to the emergency room, as many uninsured people did for routine problems before, it would have cost about $1,800, clinic officials estimated.

“Patients know this is their home, providers know this is our patient. It improves health outcomes,” said Albert Yu, medical director of Chinatown Public Health Center, the first Healthy San Francisco participating clinic. “Previously, patients would go from center to center, or the medical facility might not recognize that she is our patient. She is just coming in for a cold and therefore I can ignore the mammogram referral.”

For patients, it is often a godsend.

“It gives you the option to have medical care and everybody deserves that," said Carol Graham, who lost her job of 17 years, and with it private health insurance, before signing up for Healthy San Francisco. “Oakland doesn’t have this.” She noted that her sister, who lives across the bay, does not have access to a similar program. “I was surprised by how life can be different just by crossing the bridge.”

For Megan Alyse, signing up for Healthy San Francisco allowed her to continue to write her doctoral thesis when she was no longer connected with a school and thus without insurance. “I paid hardly anything and was able to see a doctor,” she said.

Assessing Newsomcare

In 2006, then-Mayor Gavin Newsom announced a plan hatched by then-Public Health Director Mitch Katz and then-Supervisor Tom Ammiano to cover the uninsured, albeit only within city limits. The left-leaning Board of Supervisors rallied in unanimous approval.

What existed before was a safety-net system of scattered clinics and emergency rooms that cared for whoever walked in the door. They typically treated people for whatever episode brought them in, patched them up and sent them on their way. Emergency rooms were a chaotic jumble of the sick and not-so-sick. Many people didn’t get the care they needed because they didn’t know where to go.

City leaders needed a way to make the plan work economically. And they needed to prevent employers from seeing it as a chance to cut costs by dropping private health insurance and making the city pick up the tab. In part, that meant shifting some responsibility to employers — an idea that if not uniquely popular in San Francisco is certainly not shared nationwide, as the political climate turns toward austerity.

The city coupled Healthy San Francisco with an ordinance requiring employers to spend a minimum of $1.37 per hour per worker on employee health care. Businesses can do one of three things to meet the requirement: buy private insurance for their employees, contribute to Healthy San Francisco, or pay into a medical reimbursement account for employees who live outside the city or earn too much to qualify.

The Health Care Security Ordinance requires businesses with 20 or more workers and nonprofits with 50 or more employees to spend at least $2,849 per year for a full-time employee on health care. For larger employers the rate is $4,285.

Eighty percent of employers have chosen to satisfy the requirement by buying private insurance. The rest use the “city option” — Healthy San Francisco or the reimbursement accounts. But in the last three years, the contributions to Healthy San Francisco have been shrinking, making employer support of the program uncertain.

It adds up, for now

While the total cost of the program has stayed within the Newsom administration’s $200-million-a-year forecast, where that money comes from does not look like the projections. A plan that was supposed to be financed in large part by employers and participants is not seeing that money.

The employer contribution raised relatively modest revenues. Of Healthy San Francisco’s total $177 million budget in the last fiscal year, businesses covered just $12.9 million, or about 7 percent. When city officials created the program they envisioned businesses covering $30 million to $40 million, or at least 15 percent of the cost.

The city’s General Fund picked up nearly eight times that amount — $99.7 million. The contributions of individuals opting to buy Healthy San Francisco for themselves contribute just $5.9 million or a bit more than 3 percent of total costs.

A big chunk of the program is covered by the federal government through a $27.4 million annual grant awarded in 2007 for local health care initiatives that expired in July.

Another $11 million of that charity care was expended by hospitals not owned by the county. The independent nonprofit community clinics — many of them barebones operations where volunteers do some of the administrative work and constant fundraising is the name of the game — contributed $16 million, mostly from federal grants for taking care of the indigent.

Without that extra $55.4 million, mostly from federal sources, the program would be hard to sustain.

U.S. subsidies uncertain

At some point, federal funding to Healthy San Francisco could disappear altogether as federal health reform is fully implemented — or if it is scrapped by a future Republican administration.

“They will have to rethink where the money is coming from,” said Dylan Roby, a research scientist and assistant professor at the University of California-Los Angeles’ Center for Health Policy Research. “They won’t have federal dollars anymore.”

But city officials said the plan all along was that the need for Healthy San Francisco would diminish later this decade with the phase-in of national health care reforms passed in 2010.

Under the Obama reforms, more of the currently uninsured population will get access to insurance through two programs: an expansion of Medicaid and the Health Insurance Exchanges, through which individuals and small businesses can buy insurance more easily. Brigham, the Healthy San Francisco director, said she expects thousands of patients to leave the system with these reforms.

“We don’t think it’s a bad thing that we’ll be serving fewer people,” Brigham said. “We’ve always said from the beginning that insurance is preferable to Healthy San Francisco. HSF is not insurance, it’s access.”

She estimated that 60 percent of Healthy San Francisco’s enrollees would eventually leave under the federal plan. In the meantime, she is not that concerned that nonprofit community clinics are footing more of the bill for treating Healthy San Francisco patients because they are getting federal grants. Before the city program, they got little if any local government money, she said.

Less from business, patients

What does concern some city officials, particularly at the Office of Labor Standards Enforcement, is the shrinking financial support by businesses.

The amount collected from employers choosing Healthy San Francisco for some of their employees is small, and gradually falling. The $12.9 million employer contributions last year were down from $13.9 the year before, and off by almost one-third from two years earlier, when employers contributed $18.2 million.

Healthy San Francisco’s budget also is not getting much help from individuals paying into the system. Revenue from individuals choosing Healthy San Francisco as an alternative to insurance in the 2010-2011 fiscal year was only $5.7 million, up $5 million from the year before and $3.2 million the year before that.

By and large, people enrolling in Healthy San Francisco are poor. Even though the city extended the program to uninsured people who make up to 500 percent of federal poverty level — a gross income of $50,450 for an individual, at which level they are asked to contribute a modest $150 a month, plus co-pays — the program has almost no participants in that bracket. Two-thirds of enrollees live at or below the poverty level and pay nothing. Another 26 percent are within 200 percent of poverty, and pay $20 a month — far below the cost of a doctor’s visit.

Experiments nationwide

At least one local government, Broward County in Maryland, has decided to replicate Healthy San Francisco exactly, while many other localities are studying it. Massachusetts and Vermont also have created their own permutations of “universal” health care.

In California the tab for safety-net care falls to counties, which run hospitals largely to take care of the poor and under- or uninsured. (San Francisco is both a city and a county.) The uninsured often go to the nearest hospital’s emergency room, which cannot legally turn anyone away for lack of funds.

The need surely has not gone away. U.S. Census Bureau statistics indicate that the number of uninsured people has climbed during the recession, in San Francisco and nationwide. It estimates 96,107 San Franciscans, including children and the elderly, lack insurance — about 12 percent of the city’s population. So unless and until national reforms take effect, Healthy San Francisco should expect more people seeking help, especially if the economy continues to sputter.

Nationwide 49.7 million people are uninsured — one in every six people. Spending on health care continues to far outpace inflation. U.S. health care spending grew 4 percent in 2009, to $2.5 trillion, or about $8,000 for each person, according to the Department of Health and Human Services. The growth is believed to be accelerating and is projected to average 6 percent a year between 2010 and 2019. Health care expenditures now account for 17 percent of gross domestic product, a measure of spending on all goods and services in the country.

“The U.S. has the most expensive health care system in the world, with health status indicators that are, at best, only average in comparison with the less costly health systems of other countries,” said Shortell of U.C. Berkeley’s School of Public Health, in a recent paper published in the journal Public Health Reviews. “Thus the pressure to provide more cost-effective care is particularly intense.”

Shortell said the advent of patient-centered medical homes could provide more cost-effective delivery of health care, especially if combined with payments that reward health providers for outcomes, rather than charge fees for services rendered. This is what Healthy San Francisco is trying to achieve.

“Studies show medical homes are associated with higher quality at the same or lower costs,” he said. “There’s been half a dozen studies showing that. And the federal government is encouraging medical homes.”

Shortell said Healthy San Francisco seems to be successful in addressing national concerns about costs on a local level by coordinating clinics and hospitals. But he said the city’s reliance on the federal government for much of its money, either directly or through subsidized clinics, was not a big deal. That is to be expected as local governments struggle to figure out the new mix of who pays for the uninsured.