It’s easy to think that the unprecedented response to COVID-19 created many of the challenges facing health care in Kentucky and across the country.
But according to industry experts, those concerns – shortages of medical personnel, limited access to certain types of care, struggling rural hospitals, and rising costs for patients and providers – existed long before the pandemic.
“COVID did not create the issues, but it pushed them off the cliff and certainly made folks aware that we have some tremendous challenges,” says Sen. Stephen Meredith (R-Leitchfield), a retired hospital CEO and current chair of the Senate Health Services Committee.
Kentucky’s unique demographics further exacerbate those problems, according to health insurance attorney Vickie Yates Brown Glisson, who served as secretary of the Kentucky Cabinet for Health and Family Services during the Bevin Administration. She says the commonwealth has a greater rural population than the national average, 50 percent compared to 20 percent. She says those individuals tend to be older, have more chronic conditions, and live in areas with fewer providers.
“It’s almost high risk to live in a rural area in Kentucky, it’s that serious,” she says.
Poverty is yet another complicating factor. More than a third of Kentuckians are on Medicaid, and Sen. Karen Berg, who is a radiologist in Louisville, says the connections between poverty and poor health are seen across the commonwealth.
“In rural portions of the state and urban portions of the state, you see very similar outcomes based on socioeconomic status and needs that are just not being met,” says Berg.
In addition to these obstacles, administrative burdens placed on the system by insurance companies and government regulation affect the quality of care. Meredith says Americans spend almost 30 cents of every dollar on health care administration alone. In total, he says, the U.S. spends up to three times more on medical services than other industrialized nations yet still has “terrible” health outcomes.
“We have to have a paradigm shift in this country and take better advantage of these dollars that are out there,” says Meredith. “I don’t think we need to put more money into health care. We need to spend our money more wisely and we’re not doing that.”
Issues Impacting Rural Health Care
Because of this complex web of problems, many of Kentucky’s rural hospitals are in critical condition. Of the state’s 63 small-town hospitals, Meredith says about a third of them are in such poor financial condition they may not survive without some kind of assistance.
The 2023 General Assembly provided some help with passage of House Bill 75, which boosts Medicaid payment rates for outpatient procedures performed at hospitals. It complements Hospital Rate Improvement Program (HRIP) legislation passed in 2019 that boosted reimbursements for inpatient procedures. Meredith calls the two bills a “lifeline” for rural providers.
“If we didn’t have this HRIP program for in-patient (and) out-patient, I’m confident that you’d see numerous rural hospitals close in Kentucky,” says Meredith.
But even with the higher reimbursements, Berg says providers are still struggling to recover their expenses.
“Hospitals are not getting paid what it costs them to give the services,” says Berg. “That’s an unsustainable business model.”
It’s not just hospitals that are fighting for better reimbursements from the federal government. Glisson says doctors have experienced a 26 percent decrease in Medicare reimbursements since 2001. She says that puts a huge strain on practices, especially those in rural communities.
“New physicians are making decisions to say, ‘I can’t afford to go into a rural area because I can’t afford to run an office there,’” says Glisson.
Even as providers struggle under low reimbursement rates, the number of Kentuckians on Medicaid is likely to decrease in the months ahead. The end of certain COVID-era regulations means that up to 250,000 Kentuckians could lose their Medicaid coverage unless they take action to renew it.
“People are becoming uninsured for the first time in many years,” says Emily Beauregard of Kentucky Voices for Health. “It’s primarily for paperwork reasons.”
Kentucky’s high numbers of patients on government support also make it difficult to recruit physicians to the commonwealth. When he was a hospital CEO, Meredith says the first thing doctors asked during job interviews was what percentage of the local population was on Medicaid. With more patients on government aid, those recruits reasoned, the less money they would earn for services. Meredith says that only makes it harder to get providers to locate in small towns.
“People want to come to rural communities, they like the quality of life,” says Meredith. “But why would anyone choose to come to a rural community knowing you’re going to make 25 to 30 percent less than your urban counterparts? It’s not fair.”
As a result of all these factors, Glisson says, two-thirds of Kentucky counties now lack primary care services.
The Role of Insurance Companies
Private insurance adds another layer of administrative and economic complexity for patients and providers. Patrick Padgett of the Kentucky Medical Association says it’s tough enough for patients to find a doctor they can see within a reasonable period of time, much less a doctor who is covered by the patient’s health insurance plan. If the person does find a physician, then they have to worry about whether their insurance will cover their treatment or come back months later after the treatment is complete with a denial-of-care notice.
“That’s getting worse and worse for physicians, for hospitals, (and) for patients especially,” says Padgett.
Working with health insurance companies is an expensive proposition for providers, according to Berg. She says the average physician’s practice in the United States spends $100,000 a year just to process insurance billing. She says fighting insurers that decide what services are and aren’t covered is extremely difficult.
“Image what type of resources you’re expending trying to get insurance companies to actually pay for what they’re supposed to cover,” says Berg. “It is exhausting, it is expensive, it is time consuming, and it is money that should be being spent on direct patient care.”
Another burden that insurance companies place on doctors, according to Padgett, is prior authorization. That’s where a health plan requires the provider to get advance approval for a test or treatment before the service is provided. Padgett says that creates administrative hassles for the provider who must provide required paperwork to the insurance company and then follow up for an answer. If the service is denied, he says, then the patient is left deciding whether to pay out of pocket for the treatment.
Then there is prescription drug pricing. Padget says health plans work with so-called pharmacy benefit managers (PBMs) to manage the costs of drugs. But he says in many instances, insurance companies own both the PBMs and the pharmacies that dispense the drugs. He argues that vertical control of the marketplace is causing drug prices to skyrocket.
“As consumers we pay a lot of money out of pocket for these drugs,” says Padgett. “It would be nice to not have to go through that and know that the insurance company, one way or another, is making a lot of money.”
The administrative requirements that insurance companies place on providers are bad enough, but Beauregard says it’s even harder for most patients to make sense of their own coverage.
“It’s so complicated,” says Beauregard. “It’s just a really hard system... for Kentuckians to be able to navigate and to feel confident that they’re going to get the care that they need and not be at risk of bankruptcy or just have bad debt hanging over their head for years.”
Options for Changes and Improvements
So how can costs be controlled and access to care be improved? Dr. Stephen Houghland of the Kentucky Primary Care Association says there are numerous options for addressing those issues.
“Shifting from being an acute-care paradigm to more prevention and health in addition to health care is something that we need to do,” he says.
Berg agrees, saying reimbursing providers just for treating sick patients is the opposite of what Americans actually need.
“Nobody is getting reimbursed to try to make people not ever get sick, which would be the ideal,” says Berg. “The best way is that your reimbursement model would be based on how many of your patients are actually healthy and don’t need access to health care.”
A total overhaul of health care to a wellness model would be expensive and likely take years to implement, says Houghland. But he contends other solutions would also help the current system. To address doctor shortages, for example, he says physician salaries could be restructured to incentivize primary care. Medical schools could also work to develop prospective students from rural communities who would then be encouraged to return home to start a practice.
Meredith says Medicare and Medicaid could restructure their reimbursements to provide larger payments to providers operating in impoverished areas. He says that would improve access to care in rural communities and urban neighborhoods that are health care deserts.
“Why wouldn’t we do that?” says Meredith. “If we invest in those communities, it’s going to improve the quality of life for those people, it’s going to improve health care outcomes, (and) it’s going to save the system money.”
To provide relief on prescription drug prices, Glisson wants the federal government to continue the 340B pricing program, which allows providers that serve low-income and uninsured patients to buy certain prescription drugs at steep discounts. But 340B has faced legal challenges, and Glisson says some in the federal government want to end the program.
“It has undergirded and kept a lot of these rural hospitals afloat,” says Glisson. “If that goes away… it will just exacerbate the problem.”
With such a diverse and complex health care system comprising patients, providers, private insurance companies, and government programs, Beauregard says the state needs to implement an all-payer claims database to track information on all medical care claims.
“We can use a database like that to make much more informed and more targeted policy decisions,” says Beauregard, “to really hone in on where the greatest need is and create those targeted interventions and make sure we’re investing in the right things.”
Finally, Beauregard says the state should do more to address poverty, which she says is an underlying cause of so many poor health outcomes for Kentuckians. She says people who can’t afford to meet basic needs like food, housing, and childcare have a much harder time maintaining good health.
