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OCR for page 63
3
Public and Private
Insurance Coverage
Immunization is financed through private health insurance, public
safety net programs, and patient out-of-pocket spending. The source of
coverage varies substantially by age (see Table 3-1~. Private insurance
covers 52 percent of children aged 0 to 5 years for immunizations, and
public programs cover about 34 percent. The remaining 14 percent of chil-
dren are underinsured; as noted in Chapter 1, this population is defined
here as those who have insurance that does not cover immunizations (see
Figure 3-1~. Children who have no insurance (public or private) are auto-
matically covered by the Vaccines for Children (VFC) program; children
who are underinsured can receive VFC-purchased vaccines only in feder-
ally qualified health centers and in their doctors' offices in some states
that have expanded the VFC program with state dollars.
Americans aged 65 or older are almost universally covered for immu-
nizations through Medicare. Adults aged 18-64 are covered less fre-
quently for immunizations than either children or the elderly (see Figure
3-2~. Private insurance covers about 41 percent of this population for im-
munizations, and public programs cover about 9 percent. The remaining
50 percent are either underinsured or uninsured. Unlike children, adults
who are uninsured are not covered by any public programs until they
become eligible for Medicare.
While older adults have Medicare coverage, adults under age 65 have
virtually no safety net coverage for immunization. Only 17 percent of
iCoverage can refer to either the rate of immunization in a population or insurance enroll-
ment. Throughout this report, the term is used exclusively to mean insurance enrollment.
63
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64
FINANCING VACCINES IN THE 21ST CENTURY
TABLE 3-1 Insurance Coverage for Immunization by Age Group, 2000
Category
Number
Covered % of Population
(in thousands) Category
U.S. Population 281,400
Children 0-5
Medicaid-enrolled 4,649 18.3
SCHIP Medicaid expansion 241 0.9
SCHIP Stand-alone 771 3.0
Native American VFC-eligible 261 1.0
Private insured immunization covered 13,143 51.8
Underinsured for immunization 3,494 13.8
Medicare-enrolled (disabled-ESRDa) 194 0.8
Uninsured 2,619 10.3
Subtotal 25,372 100.0
Children 0-17
Medicaid-enrolled 12,058 15.9
SCHIP Medicaid expansion 690 0.9
SCHIP Stand-alone 1,961 2.5
Native American VFC-eligible 261 0.3
Private insured immunization covered 42,113 54.6
Underinsured for immunization 11,195 14.5
Medicare-enrolled (disabled-ESRDa) 517 0.7
Uninsured 8,406 10.9
Subtotal 77,201 100.0
Adolescents and Adults 18-64
Medicaid-enrolled 10,582 6.0
Private insured immunization covered 72,050 40.9
Underinsured for immunization not high risk 38,270 21.7
Underinsured for immunization high risk 20,680 11.7
Medicare-enrolled (disabled-ESRDa) 4,778 2.7
Uninsured not high risk 21,805 12.3
Uninsured high risk 8,229 4.7
Subtotal 176,394 100.0
Adults Aged 65+
Medicaid-enrolled 3,293 5.9
Private insured 20,761 30.6
Medicare-enrolled 31,733 57.0
Uninsured 245 0.4
Subtotal 56,032 100.0
aEnd-stage renal disease.
NOTE: Percentage totals may not add due to rounding.
SOURCES: Coverage data from U.S. Census Bureau, 2002; underinsurance data based on an
analysis by Wood, 2003; calculations by the committee.
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PUBLIC AND PRIVATE INSURANCE COVERAGE
Underinsured
1 3 f3°/n
Private Insurance
51 .8%
65
Public Coverage
(VFC/Other)
34.4%
FIGURE 3-1 Insurance coverage of vaccination, children aged 0-5 (2000~.
SOURCES: U.S. Census Bureau, 2002; calculations by the committee based on an
analysis by Wood (2003~.
Underinsured
33 4°/n
Private Insurance
40.9%
Public Coverage
8.7%
Uninsured
17.0%
FIGURE 3-2 Insurance coverage of vaccination, adults aged 18-64 (2000~.
SOURCES: U.S. Census Bureau, 2002; calculations by the committee based on an
analysis by Wood (2003~.
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66
FINANCING VACCINES IN THE 21ST CENTURY
adults aged 18-64 with chronic health conditions and therefore at high
risk for disease had ever received the vaccine in 1999; only 31.9 percent
of high-risk adults received an influenza vaccination (National Center for
Health Statistics [NCHS], 2000~.
State-funded county and city health departments are principally re-
sponsible for adult immunizations, and they are subject to capacity limi-
tations and funding uncertainties. Fortunately, influenza immunizations
are relatively inexpensive, and it has become common to administer them
in shopping malls and employer settings. But these may not be appropri-
ate settings for those who have chronic health conditions such as lung or
heart disease or diabetes, especially those with limited mobility; and the
paucity of coverage may limit the availability of these vaccines within the
office-based practice setting.
The next two sections of the chapter provide a more detailed look at
public and private coverage, respectively. The final section addresses the
key barriers that currently constrain the ability of the immunization sys-
tem to achieve the nation's immunization goals.
PUBLIC INSURANCE COVERAGE
Funding for both vaccine purchase and immunization infrastructure
has historically been shared by the federal government and the states (see
Chapter 2~. While expenditures on vaccine purchase are increasingly de-
termined by entitlement programs such as VFC and Medicaid, expendi-
tures on infrastructure are largely discretionary and vary considerably
from state to state. Table 3-2 summarizes the various sources for public
funding of immunization.
TABLE 3-2 Public Immunization Funding, Fiscal Years 1999 and 2002
(in millions of dollars)
1999
2002
Funding Source Federal State Total Federal State Total
Section 317 448 NK 448 628 NK 628
VFC 467 NA 467 990 NA 990
Medicaid 70 57 127 90 69 159
Medicare 115 NA 115 255 NA 255
Total 1,100 57 1,157 1,963 69 2,032
% Change 78% 21% 76
NOTE: N/A = not applicable; NK = not known.
SOURCES: FY 1999: IOM, 2000a; FY 2002: CDC, 2002e.
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PUBLIC AND PRIVATE INSURANCE COVERAGE
67
Public coverage for immunization includes both safety net programs
designed to provide access for disadvantaged populations and non-safety
net programs, such as health benefits for veterans, military personnel, and
civilian government employees. These programs are described in depth
in a recent IOM report (IOM, 2000a) and are briefly reviewed below.
Vaccines for Children
The Vaccines for Children (VFC) program was established by a 1993
amendment to the Social Security Act as an entitlement to provide federal
funds for the purchase of vaccines for children under 18 years of age in
four categories: Medicaid-eligible, uninsured, Native American/Alaska
Native, and children who receive vaccines at federally qualified health
centers (FQHCs). VFC funds are available to underinsured children only
at FQHCs.
VFC works as follows. After recommending that a vaccine be added
to the schedule of recommended vaccines, the Advisory Committee on
Immunization Practices (ACIP) takes a separate vote for inclusion of the
new vaccine in the VFC program. If the ACIP recommendation is ap-
proved by the administrator of CDC, the vaccine is automatically included
in the VFC entitlement and must be provided free of charge to all eligible
children. CDC then negotiates a discounted federal price with the manu-
facturer. CDC allocates to each state a credit balance based on the esti-
mated number of recipients, which the state can use to order vaccine sup-
plies from the manufacturer at the discounted federal price. States
purchase vaccines and either stockpile them for distribution to registered
providers or make arrangements with the manufacturer to deliver the vac-
cine directly to providers. By providing free vaccines to private providers
for administration to VFC-eligible children in their medical homes, VFC
has resulted in a large shift of public immunization from the public to the
private delivery system (IOM, 2000a) (see Chapter 2~. The creation of VFC
also transferred a significant financial burden for vaccine purchase from
the states to the federal government. States were no longer obligated to
purchase childhood vaccines from their state-funded Medicaid budgets.
Section 317 Vaccines
Section 317 of the Public Health Service Act was established in 1963 to
provide states with discretionary grants for vaccine purchase and infra-
structure support through two types of funding: (1) direct assistance (DA)
funds, which make up the majority of Section 317 funds received by im-
munization programs for vaccine purchase; and (2) financial assistance
(FA) funds, which typically support program infrastructure but since 1999
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68
FINANCING VACCINES IN THE 21ST CENTURY
have also included support for the purchase of vaccines for which there is
no federal contract, such as tetanus and diphtheria vaccines and adult
vaccines for hepatitis B. influenza, and pneumococcus.
Over the last decade, states have experienced a disruptive Section 317
funding cycle. Until the early 1990s, infrastructure had received minimal
federal support. In response to the measles outbreak of 1989-1991, Section
317 funding for infrastructure development expanded dramatically. Be-
cause states were unable to ramp their programs up rapidly to utilize this
funding, they experienced high levels of "carryover" funds. In response,
Congress reduced infrastructure funding sharply in 1997, precisely at the
time when many states were beginning to establish programs (Freed et
al., 2000~. States can use only minimal amounts of VFC funding for infra-
structure; therefore, state health departments sought to replace the Sec-
tion 317 cuts with new state revenue allocations, with generally limited
success.2 A previous IOM committee recommended an increase in federal
funding of $75 million per year for infrastructure. This level was subse-
quently approved by Congress and included in the fiscal year 2001 and
2002 federal budgets.3
State and County Programs
States and counties provide safety net coverage for immunization
through public clinics and a variety of targeted outreach programs. These
programs are funded by a variety of sources state general funds, federal
maternal and child health block grants to the states, public health service
block grants, federal programmatic grants, private foundations, and fed-
eral Section 317 grants.
Direct state funding to immunization programs for vaccine purchase
is highly variable (Freed and Cowan, 2002~. Several states provide no such
funding. In many states that do have state funding for vaccine purchase,
the funds are earmarked for adult vaccines or special programs (e.g., to
support a new law requiring immunization for hepatitis B for entry to
school). State legislatures typically appropriate general revenue funds for
vaccine purchase, but financial support may also be provided through an
ongoing mechanism to generate funds through a specific tax or surcharge
or insurer contribution. State Medicaid and State Children's Health Insur-
2Twenty-one states provide direct infrastructure funding; only four states provide state
funding that exceeds 40 percent of their infrastructure budgets (Freed and Cowan, 2002~.
3The Department of Health and Human Services' fiscal year 2001 budget included a $42.5
million increase for fiscal year 2001, and the fiscal year 2002 appropriation included a $32
million increase (W. Orenstein, remarks to the IOM Committee on the Evaluation of Vaccine
Purchase Financing in the United States, May 21, 2002~.
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PUBLIC AND PRIVATE INSURANCE COVERAGE
69
ance Program (SCHIP) funds are also provided funds for vaccine pur-
chase. Medicaid reimburses providers for the purchase of vaccines for
those who are Medicaid-enrolled but not VFC-eligible (e.g., over 18 years
of age). Vaccine purchases for children served under stand-alone SCHIP
(i.e., non-Medicaid) programs must be made with state funds; 31 states
have or are starting stand-alone SCHIP programs (Freed and Cowan,
2002~.
States with universal purchase and enhanced-VFC programs expand
eligibility for VFC vaccines by supplementing VFC vaccine purchases at
federally discounted prices. They fund these efforts by providing a com-
bination of Section 317 and state general revenue funds for the purchase
of vaccines for non-VFC-eligible children. Enhanced-VFC states provide
free vaccines to non-VFC-eligible and underinsured children who are seen
in the public sector. In addition, state funds are used to purchase vaccines
for underinsured children in the offices of private providers. There are
currently 15 states with enhanced-VFC programs, while 14 states have
universal purchase programs in which ACIP-recommended vaccines are
made available to all children, regardless of insurance status (see Table 3-3~.
Universal purchase states tend to use a larger proportion of state funds
relative to Section 317 funds for vaccine purchase. Some states exclude
the most expensive vaccines (typically pneumococcal conjugate and vari-
cella) from both enhanced-VFC and universal purchase programs (Freed
and Cowan, 2002~.
Medicare
Medicare covers virtually all Americans aged 65 and over about 32
million in all through Medicare Part B. as well as about 5,000 children
and adults who are disabled or who have end-stage renal disease (Wood,
2003~. Medicare coverage for immunization, however, is limited to influ-
enza and pneumococcal vaccines, although others can be administered
when shown to be medically necessary (i.e., not preventive in nature).
PRIVATE INSURANCE COVERAGE
The nature and scope of coverage for immunization tend to vary by
the type of insurance plan. For example, health maintenance organiza-
tions (HMOs), which have traditionally emphasized preventive services,
frequently provide immunization as a basic covered benefit. Preferred
provider organizations (PPOs) and indemnity insurance, on the other
hand, have more limited immunization benefits. The first four columns of
Table 3-4 show coverage levels for different types of health plans accord-
ing to recent surveys.
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70
FINANCING VACCINES IN THE 21ST CENTURY
TABLE 3-3 State Vaccine Purchase Financing Systems
VFC Only
Enhanced VFC
Limited
Universal
Purchase
Universal
Purchase
Alabama
Arkansas
California
Colorado
Delaware
District of Columbia
Hawaii
Indiana
Iowa
Louisiana
Mississippi
Missouri
Ohio
Oregon
Pennsylvania
Tennessee
Virginia
West Virginia
Wisconsin
Floridaa
Georgia
IllinoisC
Kentucky
Maryland
Michigana
Minnesota
Montanaa~c~d
NebraskaC,e
New York
Oklahomaa~c
South Carolina
TexasC
Utaha
Wyoming
Connecticutb
Nevadab
North Carolinab
North Dakotab
South Dakotab
Vermontb
Alaska
Idaho
Maine
Massachusetts
New Hampshire
New Mexico
Rhode Island
Washington
aMoved from a VFC-only to enhanced-VFC system in 1999.
bMoved from a universal purchase system to a limited universal purchase system in 1999.
CPCV-7 (and varicella in Illinois) available only for VFC-eligible children.
dIn process of changing back to VFC-only system.
ePrivate providers can choose to receive some state-purchased vaccines for non-VFC-
eligible children.
SOURCE: Freed and Cowan, 2002.
In addition, the relative market share of different types of insurance
plans affects the rate of private immunization coverage. According to the
most recent Kaiser Family Foundation-Health Education and Research
Trust (KFF-HRET, 2002) survey of employers, the growth of private
HMOs plateaued in 1996 at 31 percent of covered employees and had
declined to 26 percent by 2002. Point-of-service plans, many of which are
similar in benefit design to HMOs, plateaued in 1999 at 25 percent of cov-
ered employees and had declined to 18 percent by 2002. PPOs, on the
other hand, grew steadily between 2000 and 2002, and now represent 52
percent of employer-based enrollment. The last three columns of Table
3-4 indicate enrollment trends for each type of insurance plan. Given the
more limited range of immunization benefits within PPOs relative to
HMOs and point-of-service plans, immunization rates are likely to de-
cline should these trends continue, if only because of the change in the
relative market share of insurance plan types.
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PUBLIC AND PRIVATE INSURANCE COVERAGE
7
TABLE 3-4 Insurance Coverage for Immunization and Employer-Based
Market Share by Type of Insurance Plan
Rate of Coverage
Childhood Adult Market Share
Plan Type 1996 1998 2001a 2001a 2000 2001a 2002
Health maintenance 97% 99% 80% 66% 29% 37% 26%
organization
Point-of-service plan NA 98% 78%
Preferred provider 82% 86% 79%
organization
Indemnity insurance 68% 79%
58% 22% 20% 18%
57% 41% 50% 52%
NA NA 8% NA 5%
abased on data from the National Survey of Employer-Sponsored Health Plans 2001, con-
ducted by Mercer Human Resource Consulting, ~c. Survey excluded indemnity option.
SOURCES: Wood, 2003; KFF-HRET, 2002.
The rates of private insurance coverage indicated in Figures 3-1 and
3-2 somewhat overstate the level of private coverage as a source of pay-
ment for immunization because they omit patient cost sharing in the form
of deductibles and copayments. These costs are difficult to estimate, but
indications are that they represent a significant portion of immunization
payments. For example, a recent National Immunization Survey found
that 79 percent of privately insured children had some sort of payment
associated with their last immunization visit (CDC, 2002f), although the
median amount was only $9.96. In a study by Lieu et al. (1994b), 66 per-
cent of privately insured immunization patients at public clinics stated
that they were using the public clinic rather than another source because
of cost.
Concerns have been raised about the potential drift toward reduced
benefits on the part of all types of insurance plans. The committee has no
specific evidence that insurance plans have dropped immunization cov-
erage, but believes that immunization benefits are likely to follow trends
in other benefits, especially as the total cost of vaccination rises relative to
that of other benefits. In 2002, 17 percent of workers were in companies
reporting a decline in benefits from the previous year (KFF-HRET, 2002~.
Between 2000 and 2002, deductibles for PPO in-plan coverage grew by 48
percent. Employer health premiums increased by 12.7 percent between
2001 and 2002, the second year of double-digit increases. There is concern
that the higher expected prices of new vaccines and the increasing num-
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72
FINANCING VACCINES IN THE 21ST CENTURY
her of recommended vaccines will lead to a further erosion of immuniza-
tion benefits and continuing increases in cost sharing (Robinson, 2002~.
Patient cost sharing is increasingly used by employers as a way to
shift some of the cost burden of health care to employees. But the eco-
nomic rationale that has propelled cost sharing into wide use among in-
surers from the 1970s is its effect on patient demand. By placing some
financial responsibility for the use of medical care on consumers, cost shar-
ing encourages them to limit frivolous utilization and to shop for lower-
priced services. The use of cost sharing in the case of immunization may
indeed encourage price shopping (as is indicated by the high numbers of
insured patients seeking immunizations at public clinics because of costs
[Lieu et al., 1994b]~. On the other hand, cost sharing may discourage some
people from receiving immunizations at all. Thus, while there are desir-
able aspects of cost sharing, in the vaccine context it is potentially coun-
terproductive in that it works directly against the policy of promoting the
utilization of vaccines for the public good.
Defined contribution plans, although not yet a significant market pres-
ence, have the potential to grow rapidly (Gabel et al., 2002~; indeed, 6 per-
cent of firms report that they are "very likely" to adopt such a plan within
the next 5 years (KFF-HRET, 2002~. These plans allow consumers to allo-
cate dollars from a medical savings account as they wish. The growth of
these plans may have a negative effect on rates of immunization, as some
consumers in these plans are likely to forego such preventive benefits.4
The ability of private insurers to drop coverage or increase cost shar-
ing is constrained by federal and state insurance mandates. Federal main-
tenance-of-effort laws were intended to prevent crowding out of private
coverage with the passage of VFC. Immunization benefit mandates have
also been enacted in 28 states. In 18 of these states, immunization benefits
are exempt from deductibles, and 12 states prohibit insurance plans from
charging patients deductibles and copayments (American Academy of
Pediatrics [AAP], 2003~. State laws, however, apply only to state-regu-
lated plans; self-funded employer health plans, which represent about half
of enrollees in private insurance plans,5 are exempt from state regulation
under the Employee Retirement and Income Security Act (ERISA). Fur-
thermore, interpretation and enforcement of state mandates vary widely
(Swartz, 2003~.
4Some plans fully fund preventive benefits to address this concern.
5In 2000, 48 percent of enrollees in private employer-sponsored health plans were in plans
that were self-funded and therefore exempt from state insurance regulation under the fed-
eral Employee Retirement Income Security Act (Bureau of Labor Statistics, 2003~.
OCR for page 73
PUBLIC AND PRIVATE INSURANCE COVERAGE
73
In universal purchase states, health insurance plans usually provide
coverage for vaccines but do not bear their costs because the state pro-
vides the vaccines free of charge to providers. These plans do, however,
pay provider fees associated with vaccination. Several states have ex-
cluded certain expensive vaccines from their universal purchase programs
because of severe budget constraints, and one state has returned to a
nonuniversal program. If this should become a trend, it is not clear that
private health insurers would be willing and/or able to quickly resume
funding for immunizations.
Given the potential for increases in vaccine costs (as discussed in
Chapter 1), no one can predict with certainty how insurers will address
immunization benefits in the future. However, both health plans and
employers have expressed alarm about the rate of increase in vaccine
expenditures and the financial pressures that could ultimately lead to the
further reduction or elimination of immunization benefits (Swartz, 2003~.
There are two principal concerns regarding private coverage of im-
munization. First, erosion of coverage shifts the financial burden to both
individuals and public payers. For some individuals, this may mean that
they do not have access to immunization services. For states, this erosion
adds to budgetary stresses, delays in funding, and increased fragmenta-
tion of financing (issues discussed below). Second, the difficulty of accu-
rately measuring the shift from private insurance coverage to the public
sector makes it difficult to estimate vaccine budget requirements to assure
adequate funding.
BARRIERS TO A WELL-FUNCTIONING
IMMUNIZATION FINANCE SYSTEM
As noted in Chapter 1, the combination of public and private insur-
ance coverage and vaccine provider arrangements has resulted in suc-
cessfully immunizing children in remarkably high numbers. Four key fi-
nance-related barriers, however, constrain the ability of the system to
achieve the nation's immunization goals. These barriers gaps in cover-
age and patient cost sharing, funding delays, fragmentation, and a crowd-
ing out of private insurance are discussed below. Other barriers include
socioeconomic status, education, public awareness, and administrative
barriers (Santoli et al., 1998; Szilagyi and Rodewald, 1996~. Such factors
are also reviewed, followed by an assessment of the relative importance
of finance-related and other barriers and a discussion of the important
issue of pockets of need.
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80
FINANCING VACCINES IN THE 21ST CENTURY
immunization rates by 47 percent, but the cost of immunization for the
control group was excessively high at US$40-60.
Many of the above studies have shortcomings with respect to the
questions relevant to research on vaccine finance. For example, the im-
pact of underinsurance, a key focus of this report, is addressed only indi-
rectly in most of these studies, which therefore rely upon the impact of
provider out-of-pocket costs or indirect evidence. The literature also does
not examine directly the question of why insurance and cost sharing mat-
ter, given the relatively low price of most vaccines. However, research on
private physicians' referral of patients to the public sector for immuniza-
tion, which is discussed in the next chapter, may offer more insight. This
literature suggests that the relationship between immunization and in-
surance/cost sharing may have less to do with demand than with physi-
cians' decisions to provide vaccines to broad classes of patients on the
basis of their insurance coverage and physician-perceived ability to pay.
Finally, few of these studies control for confounding factors, such as non-
financial barriers (e.g., access to providers), discussed later in this chap-
ter, that may affect immunization rates.
While these studies are unsatisfying in many respects, taken together
they suggest that insurance and cost factors do influence immunization
rates. This is the case especially for lower-income children without other
insurance and for adults who lack compulsory immunization through
state school entry requirements.
Funding Delays
Bottlenecks in the current immunization system can result in delays
in coverage for vaccines. One such bottleneck results in delays between
Food and Drug Administration (FDA) approval, addition to the recom-
mended schedule, and negotiation of a contract between CDC and the
manufacturer. Such delays create hardships for budget-strapped states
and health plans. A second bottleneck often occurs with federal and state
discretionary appropriations that are required to fund vaccines for non-
VFC-eligible children and adults. The result can be a two-tier system in
which providers can immunize VFC children but must turn away chil-
dren who do not qualify for VFC or bear the costs themselves. These
bottlenecks can discourage providers from immunizing children and can
impede adult immunization efforts as states shift Section 317 and state
funds away from adult programs to address urgent childhood vaccine
shortfalls.
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PUBLIC AND PRIVATE INSURANCE COVERAGE
8
Fragmentation
The complex immunization financing system results in fragmenta-
tion of coverage and several associated problems. Multiple funding
sources make it difficult for providers to determine the eligibility of pa-
tients. This is particularly true for underinsured patients. If private pro-
viders are uncertain whether a patient is covered, they are more likely to
refer that patient to a public clinic. Even public clinics must worry about
eligibility. For example, VFC vaccines can be used for underinsured chil-
dren, but only in FQHCs.
Moreover, many patients are likely to shift in and out of eligibility
with significant frequency (IOM, 2000a, 2002d). Households that depend
on seasonal employment or are cut from Medicaid rolls during periods of
fiscal austerity are examples of the turnover that can occur in safety net
programs. As an example, 40 percent of children in California lose Medic-
aid coverage each year (IOM, 2000a). This situation creates financial risk
for providers, who may not receive payment if eligibility is determined
incorrectly. As noted above, providers may choose to refer patients rather
than deal with the complexity of the system, thereby creating fragmenta-
tion of care for the patient, additional burdens for the patient or parent,
and possibly delayed or missed immunizations. Providers are also placed
in the awkward position of providing immunizations for some but not
others on the basis of insurance coverage.
Another form of fragmentation relates to fees paid to providers for
administering vaccines. Under VFC, vaccine purchases and administra-
tion fees have two separate funding sources. The federal government pro-
vides an entitlement for vaccine purchases, while administration fees are
reimbursed through state-supported Medicaid payments. Depending on
the status of federal negotiations and state appropriations, providers may
receive vaccine reimbursement but no administration fee, fee but no vaccine
reimbursement, and other possible combinations. Furthermore, provider
administration fees vary widely across states. In many states, provider
payments barely cover vaccine costs, resulting in increases in referrals to
the public sector (Fairbrother and Haidery, 2002~. This situation in turn
makes it more difficult to estimate state discretionary funding needs.
Crowd-Out of Private Insurance
Historically, attempts to address gaps in the immunization system
have led to a crowd-out of private-sector insurance (AHSRHP, 2001; see
also Chapter 2~. Crowd-out occurs when public programs displace pri-
vate markets. For example, public housing partially displaces private
rentals and ownership when individuals who would otherwise have
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82
FINANCING VACCINES IN THE 21ST CENTURY
rented or purchased in the private market obtain free or subsidized
housing. Similarly, public financing of immunization can result in private
providers referring patients to public immunization clinics (as discussed
above) and insurance companies dropping immunization benefits. Be-
cause the public safety net system is there to immunize those without
access to private providers, many of these individuals will receive appro-
priate immunizations at the right times. But many gaps exist in the public
safety net coverage for immunization. Also, referrals from private providers
increase the chances of missed opportunities, leading to longer periods of
vulnerability to vaccine-preventable diseases.
Other Barriers
While the above analysis argues for the importance of finance-related
barriers to the achievement of national immunization goals, noneconomic
factors are also significant (see Calling the Shots [IOM, 2000a] for detailed
discussion of these factors). Evidence for the importance of noneconomic
factors includes the observation that populations with high socioeconomic
status sometimes have low immunization rates, (IOM, 2000a; Orenstein et
al., 1999~. For example, a study of privately insured children of parents
working in a large corporation revealed that only 65 percent of the chil-
dren were up to date with the 4:3:1 series at age 2 (Fielding et al., 1994~.
Noneconomic factors that influence immunization rates include both per-
sonal and systemic variables (Bates and Wolinsky, 1998~.
Personal Variables
Personal characteristics, including socioeconomic status and educa-
tional attainment, have been linked to immunization rates. In a small
multivariate analysis of children, the majority of whom lacked private
health insurance, Bates and Wolinsky (1998) found that underimmuniza-
tion at age 2 was associated with mothers who were unmarried, had mul-
tiple children, did not reside with a grandparent, did not receive adequate
prenatal care, and lived in poverty. Other studies have demonstrated posi-
tive relationships among parents' education level, family income, and
immunization rates (Ortega et al., 2000; Hughart et al., l999~. On the other
hand, when other socioeconomic variables are controlled for, race is not
usually an important factor (Bates and Wolinsky, 1998; Marks et al., 1979~.
Patient beliefs are also important correlates of immunization rates.
One study found that more than 75 percent of parents had delayed bring-
ing a child in for immunization at some time because of the child's minor
illness, even though the vaccination was not contraindicated (Abbotts and
Osborn, 1993~. Bates and Wolinsky (1998) found a significant positive as-
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PUBLIC AND PRIVATE INSURANCE COVERAGE
83
sociation between immunization at age 2 and perceived "control and re-
sponsibility over life events" and an unexpected negative association with
the perception of the benefits of immunization.
Others have looked at the impact of incentives for immunization, such
as giving toys, money, or discount coupons. However, there is little evi-
dence indicating the effectiveness of such techniques (IOM, 2000a).
System Variables
A wide range of variables relating to the immunization delivery sys-
tem has been assessed, including the immunization site, vaccine availabil-
ity, and provider variables.
As noted earlier, the provision of vaccinations in the medical home is
a hallmark of the VFC program. The implementation of VFC, as well as
similar state-level universal purchase programs, coincided with substan-
tial increases in immunization rates, suggesting that the medical home
may make an important difference in the rates achieved (Freed et al., 1999;
Nace et al., 1999~. Research findings are mixed, however, on the contribu-
tion of a routine source of care to these increases. Data from the 1988 Na-
tional Health Interview Survey (NHIS) indicated that before VFC was
enacted, 90 percent of children already had a routine source of care, al-
though only 77 percent had been fully immunized by age 2 (St. Peter et al.,
1992~. These results were affirmed by the 1993 NHIS, which revealed that
90 percent of children who were not up to date had a medical home
(Tatande et al., 1996~. Likewise, a recent study found no significant asso-
ciation between immunization rates and immunization within the medi-
cal home (Ortega et al., 2000~. On the other hand, Bates and Wolinsky
(1998) found that children are more likely to be up to date at age 2 if they
have a medical home and if their provider is a private physician.
States have also promoted immunizations at medical sites not tradi-
tionally used for the purpose, such as hospitals, pharmacies, and nursing
homes (Briss et al., 2000; IOM, 2000a). Some have promoted nonmedical
sites for immunization, such as Women, Infants, and Children (WIC) pro-
gram sites, schools, child care centers, stores, malls, and patients' homes.
The effectiveness of these interventions has not been established through
research, however. One concern regarding such strategies is that the ap-
propriate medical record for immunization may not be present at the point
of service. States have also attempted to improve access at existing sites
by extending hours, adding staff, and providing express services at im-
. . . .
mumzahon c .mlcs.
Provider-level variables affect immunization rates as well. Clinicians
defer immunizing patients with surprising regularity because of a child's
illness, a large number of shots being administered during a single visit,
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FINANCING VACCINES IN THE 21ST CENTURY
or parental concerns. As noted above, they may also refer patients to pub-
lic clinics because immunization is not financially rewarding; high rates
of such provider referrals, even among insured patients, are well docu-
mented (Zimmerman et al., 1997) (see Chapter 4 for a full discussion of
this issue). In addition, immunization involves many clinical and admin-
istrative tasks, including purchasing vaccines, managing inventories, de-
termining immunization status and eligibility, counseling parents, admin-
istering vaccines, recording and reporting immunization, and conducting
reminders/recalls. Almost all of these tasks have expanded in recent years
as a result of the growing number of vaccines and the complexity of the
schedule, the rising cost of vaccines, and the recent shortages of both child-
hood and adult vaccines. Many providers consider the financial rewards
for immunization in the form of current fees to be inadequate (AAP, 2001a).
Clinicians may also lack sufficient vaccine supplies at the time of ser-
vice. They may voluntarily elect to limit supplies because of the increas-
ing cost of purchasing vaccines and the uncertainty of reimbursement
(Freed et al., 2002a), or they may be unable to purchase adequate supplies
because of supply disruptions. While there is no direct evidence of re-
duced immunization rates or increased disease incidence as a result of
recent vaccine shortages, there is some indirect evidence that a supply
disruption may adversely affect provider immunization practices (Oram
et al., 2001~. For example, CDC has reported that 52 percent of states sus-
pended school immunization requirements as a result of the tetanus vac-
cine shortage (Orenstein, 2002c).
Providers may also lack efficient systems for vaccine administration,
such as reminder/recall systems, assessment and feedback processes,
standing orders (which allow nonphysicians to administer vaccines with-
out direct physician supervision), and even simple checklists (Briss et al.,
2000; IOM, 2000a). Evidence supporting the benefits of such systems is
limited, however, and their adoption by providers has not been wide-
spread (Darden et al., 1999; IOM, 2000a).
Unavailability of a child's complete immunization record to the clini-
cian is a critical factor in underimmunization (Stokely et al., 2001~. This
situation often occurs when families move within or across states or switch
providers, and it is exacerbated by the increasing complexity of the im-
munization schedule and the fragmentation within the immunization fi-
nancing system discussed above. There is growing evidence that the use
of electronic vaccine registries can significantly improve the accuracy of
immunization records (Boyd et al., 2002; Davidson et al., 2003; Stille and
Christison-Lagay, 2000~; the impact of such registries on immunization
rates, however, has not been clearly demonstrated. An alternative strat-
egy is to have patients or parents retain "handheld" immunization
records; here too, however, there is little evidence that this approach is
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PUBLIC AND PRIVATE INSURANCE COVERAGE
85
effective, and it may in fact cause administrative problems (Dickey and
Petitti, 1992; IOM, 2000a).
The increasing availability of combination vaccines may improve im-
munization rates. The current vaccine schedule requires as many as five
injections during a single visit. Two or more of these are often deferred
because of parental concern about the fear and pain involved in multiple
injections (Glode, 2001~. There is a clear parental preference for combina-
tion vaccines. A survey by Meyerhoff et al. (2001) found that it is worth a
median of $8.00 to parents to avoid having their child receive an addi-
tional injection. Another study found that reducing the number of shots
from four to three is worth a median of $25, from three to two is worth
$25, and from two to one is worth $50 (Lieu et al., 2000b). Also, reducing
the required number of injections can significantly reduce administrative
time (Pellissier et al., 2000~. There is, however, no direct evidence on the
impact of combination vaccines on immunization rates. There are also
potential drawbacks, including the presence of competing combinations
with various overlapping antigen menus and subtle immunologic differ-
ences that may create confusion and/or administrative burden for busy
practitioners (Le. 2001~.
Mandatory immunization, such as that required for school entry, ap-
pears to be effective in increasing immunization rates. All states adopted
such school laws during the 1970s and 1980s (IOM, 2000a), and immuni-
zation rates increased dramatically. But the relative impact of school en-
try laws compared with other factors has not been determined. Also, the
impact of school entry requirements occurs well after most vaccinations
are typically administered: 20 of the 23 recommended childhood vaccina-
tions are normally completed by 18 months of age. The increasing use of
day care requirements addresses this shortcoming, but such requirements
have not been as widely implemented as those for school entry. Other
mandates are now being widely applied for nursing homes. There is how-
ever, insufficient evidence of the effectiveness of any of these requirements
(IOM, 2000a).
Relative Importance of Finance-Related and Other Barriers
Several studies directly compare the importance of finance-related
and other factors. One study found that cost was the most important rea-
son given by parents for having their children immunized at a public
health clinic. Of those interviewed, 63 percent had come to the public clinic
because of its lower cost, and 79 percent of families interviewed rated this
as an important factor in choosing a public health facility (Lieu et al.,
1994b). Other factors cited include convenient location, no appointment
needed, recent relocation, and other access advantages. In another study,
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FINANCING VACCINES IN THE 21ST CENTURY
lack of insurance coverage was deemed the third most important reason
for incomplete immunization by age 2 (cited by 16 percent of parents),
after waiting time (33 percent) and child ill at the time of appointment (21
percent) (Nace et al., 1999~.
Developing a full understanding of the relative importance in immu-
nization of the finance-related and personal and systemic variables dis-
cussed above will require substantial additional research. No clear evi-
dence has emerged that can be used to rank the relative importance of
these factors. It is clear, however, that both sets of factors are important
and require attention if full immunization is to be achieved. If finance-
related barriers the primary focus of this report are not addressed,
strategies that address noneconomic barriers will not be fully effective.
Pockets of Need
Uninsured children fare well under the current system: they are cat-
egorically covered under VFC and can receive free vaccines in their medical
home or from any VFC provider or clinic. Ironically, the biggest coverage
gap for children is among those who have private insurance coverage-
21 percent of insured children aged 0-5 lack coverage for vaccines (Wood,
2003~. VFC statutorily excludes these children because they are "insured."
Fourteen states address this gap by providing state-funded coverage for
the underinsured. In these states, children can receive free vaccines
through their own provider, regardless of their insurance coverage. But
parents of children in the other 36 states must either pay out of pocket or
take their children to a public health clinic to obtain free vaccine.
The same problem is experienced by children who are enrolled in
stand-alone SCHIP programs. While Medicaid-eligible children are cat-
egorically qualified to receive free VFC vaccines, children in stand-alone
SCHIP states, such as California, are technically "insured," and the Cen-
ters for Medicare and Medicaid Services (CMS) has ruled that they are
excluded from VFC coverage. These children still receive vaccines from
their SCHIP provider, but without VFC funding.
Estimating the Number of Underinsured
Estimates of the number of underinsured children vary considerably
and are not deemed highly reliable. CDC is considering ways to improve
estimates of underinsurance. The committee considered several estimates,
which were summarized earlier in Table 3-4.
A recent Partnership for Prevention study used by Wood (2003) esti-
mates that 21 percent of privately insured children aged 0-5 have private
insurance that excludes immunization. This suggests that 3.5 million chil-
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PUBLIC AND PRIVATE INSURANCE COVERAGE
87
dren aged 0-5 are underinsured 13.8 percent of this age group. Wood
points out that some of these underinsured are covered through state uni-
versal purchase programs in 14 states. On the other hand, this estimate
excludes the children who are covered by insurance for immunizations
but face prohibitive copayments and deductibles.
Preliminary first-quarter results from the 2002 National Immuniza-
tion Survey indicate that 7.3 percent of children (aged 0-17) have some
kind of insurance (either public or private) that excludes immunization
(CDC, 2002d). Meyer and Waldman (2002), using data from KPMG and
Health Research and Educational Trust (HRET) surveys, estimates that
about 8 percent of children are underinsured for immunizations. The IOM
(2000a) study cited earlier also uses KPMG data to derive an estimate of 5
percent for the underinsured population aged 0-17.
Studies examining the insurance status of individuals using public
clinics support the above estimates of the incidence of underinsurance.
Lieu et al. (1994b) found that about 16 percent of immunization patients at
public clinics were underinsured. A more recent analysis of data from the
2002 National Immunization Survey found that 44-63 percent of children
vaccinated in public health clinics in South Carolina and California were
underinsured (CDC, 2002i).
Immunization Insurance Benefits for Adults
The coverage picture for adults is far less positive than that for chil-
dren. Like children, adults face the problem of underinsurance. Accord-
ing to the Partnership for Prevention survey cited above, 59 million adults
aged 18-64 have private insurance that does not include immunization
benefits (Wood, 2003~. In addition, more than 30 million adults under age
65 are uninsured. Unlike uninsured children, who are categorically cov-
ered by VFC, uninsured adults have no safety net immunization program.
Thus, a total of 89 million adults under 65 50 percent of this age group-
lack coverage for immunizations.
Older persons generally require fewer routine vaccinations than chil-
dren; but adults at high risk for vaccine-preventable diseases may need to
be immunized against pneumonia, influenza, meningitis, and hepatitis.
(Table 3-6 shows the population at high risk for severe influenza or pneu-
mococcal disease within various age groups.) More than 65,000 deaths
from influenza and pneumonia occur annually, most among older adults
(CDC, 2002b).6 In contrast, about 300 deaths occur each year as a result of
6Note, however that the majority of these deaths are among those aged 65 and older.
Some portion of these deaths are likely due to family decisions not to immunize because of
extreme age or frail health.
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FINANCING VACCINES IN THE 21ST CENTURY
TABLE 3-6 Adults Considered to Be at High Risk for Influenza or
Pneumococcal Disease
Annual
Number of
Population High Risk
Percent Population at High in Need of
of Age Population at High Risk and Publicly
Age Group at at High Risk and Under- Purchased
group Population High Risk Risk Uninsured insured Vaccine
18~9 136 million 11% 15 million 2.7 million 5.0 million 7.7 million
50-64 43 million 1oo%a
Total 180 million 32%
adults
18-64
43 million 5.5 million
58 million 8.2 million
16.0 million 21.5 million
21.0 million 29.2 million
al995 recommendation is for 100% of this group to receive influenza annually and
pneumococcal vaccine one bme.
SOURCE: Adapted from Wood, 2003.
all vaccine-preventable diseases among children. In addition, 48,000 pneu-
monia and influenza hospitalizations occur annually among adults over
age 65 (CDC, 2001a). The monetary burden of adult vaccine-preventable
diseases is estimated to be greater than $10 billion per year (CDC, 2002c).
Although Medicare plans provide coverage for older adults for pneu-
mococcal immunization (since 1981) and for influenza immunization
(since 1993), immunization levels among older adults remain low. In 1997,
66 percent of this population received an influenza immunization, and a
cumulative 50 percent had received a pneumococcal immunization still
well below the national goal of 90 percent established for each in Healthy
People 2010 (U.S. Department of Health and Human Services, 2000~. For-
tunately, many adults have access to influenza immunization sponsored
by employers, retail stores, and shopping malls. This may partly explain
the significant gain in immunization rates among this population in the
last several years.
ACIP recommends pneumococcal vaccination for all adults over
age 50, adults between age 18 and 64 at high risk e.g., those with chronic
diseases affecting the lungs, heart, immune system, and selected other
organ systems and all adults aged 65 and older (CDC, 2003f). Annual
influenza vaccination is recommended for high-risk adults (aged 18-49)
and for all adults over age 50. According to Wood, 58 million Americans,
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PUBLIC AND PRIVATE INSURANCE COVERAGE
89
or 32 percent of adults under age 65, are considered to be at high risk for
vaccine-preventable diseases (Wood, 2003~. Half of these, about 29 mil-
lion adults, have no coverage for immunizations.
FINDINGS
· An estimated 13.8 percent of children between birth and 5 years of
age are underinsured (that is, have private insurance that does not in-
clude immunization benefits).
· Half of all adults aged 18-64 lack immunization coverage; 32 per-
cent of this population (29 million adults) is considered to be at high risk.
· The proportion of children and adults without immunization cov-
erage may increase as a result of current trends in insurance benefits and
the increasing cost of the recommended vaccines on the immunization
schedule.
· Insurance coverage and patient cost sharing are among the impor-
tant factors influencing rates of immunization.
· The current vaccine financing system is fragmented and prone to
funding delays; the result is missed opportunities, institutional barriers to
. . .
mmun~zahon.
· Public vaccine financing programs have led to some crowd-out of
private immunization coverage, and attempts to limit crowd-out have met
with mixed success.
· Increasing vaccine costs, crowd-out of private-sector financing, and
federal funding lags place significant stress on state financing mecha-
nisms, prompting limits on state contributions to immunization programs.
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Representative terms from entire chapter:
private insurance
