2

Reforming Public Health
and Its Financing

The strategies necessary to reach the national health target recommended by the committee in Chapter 11 depend on the implementation of population-based prevention and wellness initiatives. However, the vast majority of government health spending in the United States is for individual illness care and treatment for disease; a far smaller and inadequate proportion is provided, ineffectively, to support governmental public health’s efforts to improve population health.2 The current financing system for health in the United States is profoundly misaligned. The nation is not buying what is needed to produce the health outcomes that it seeks.3 In this chapter, the committee examines the financing misalignment in more detail, focusing on the public health department capabilities that are needed for all or most programs (for example, in communication, information systems, and policy

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1Recommendation 1: The secretary of health and human services should adopt an interim explicit life expectancy target, establish data systems for a permanent health-adjusted life expectancy target, and establish a specific per capita health expenditure target to be achieved by 2030. Reaching these targets should engage all health system stakeholders in actions intended to achieve parity with averages among comparable nations on healthy life expectancy and per capita health expenditures.

2As noted in Chapter 1, the committee has previously described a multisectoral health system that goes beyond governmental public health and targets a wide array of determinants of health (IOM, 2011a,b). But in the context of the current report, the committee found it challenging and nearly impossible to attempt a broader examination of the funding aspects of the system as a whole—both because of its great complexity and because of the extreme scarcity of data on system contributors other than governmental public health.

3As noted in Chapter 1, this refers only to spending that is specifically for health, not to spending on education, housing, or other social determinants of health.



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2 Reforming Public Health and Its Financing The strategies necessary to reach the national health target recom- mended by the committee in Chapter 11 depend on the implementation of population-based prevention and wellness initiatives. However, the vast ma- jority of government health spending in the United States is for individual ill- ness care and treatment for disease; a far smaller and inadequate proportion is provided, ineffectively, to support governmental public health’s efforts to improve population health.2 The current financing system for health in the United States is profoundly misaligned. The nation is not buying what is needed to produce the health outcomes that it seeks.3 In this chapter, the committee examines the financing misalignment in more detail, focusing on the public health department capabilities that are needed for all or most programs (for example, in communication, information systems, and policy 1Recommendation 1: The secretary of health and human services should adopt an interim explicit life expectancy target, establish data systems for a permanent health-adjusted life ex- pectancy target, and establish a specific per capita health expenditure target to be achieved by 2030. Reaching these targets should engage all health system stakeholders in actions intended to achieve parity with averages among comparable nations on healthy life expectancy and per capita health expenditures. 2As noted in Chapter 1, the committee has previously described a multisectoral health system that goes beyond governmental public health and targets a wide array of determinants of health (IOM, 2011a,b). But in the context of the current report, the committee found it challenging and nearly impossible to attempt a broader examination of the funding aspects of the system as a whole—both because of its great complexity and because of the extreme scarcity of data on system contributors other than governmental public health. 3As noted in Chapter 1, this refers only to spending that is specifically for health, not to spending on education, housing, or other social determinants of health. 45

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46 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE analysis) and reviewing limitations imposed on the current system that in- terfere with the efficient use of existing resources. The national health target recommended in Chapter 1 is an ambitious one, but the committee believes that it is achievable because much of the cur- rent morbidity and mortality is preventable—half the deaths in the United States and more than half the morbidity (perhaps three-fourths) (CDC, 2005; Danaei et al., 2009; IOM, 2008; Woolf et al., 2007, 2010). The cost of the preventable disease burden makes it crucially important to seek, find, and implement solutions. According to federal estimates, “one year’s worth of injuries has an estimated lifetime cost of $406 billion in medical expenses and lost productivity” (Foreman, 2009). In 2004, total Medicaid smoking- attributable expenditures amounted to $22 billion (Armour et al., 2009). The core mission and unique competence of the governmental public health agencies (public health departments) are informed by their focus on wellness and prevention rather than illness care and treatment. Public health departments are statutorily charged with protecting and promoting population health, and they are uniquely positioned and qualified (through the science, tools, and skills of public health, including epidemiology and health planning) to take or support evidence-based action on many of the risk factors that lead to poor health. Although some clinical care interven- tions can help to prevent a disease process in an individual, they cannot be used efficiently throughout a population to address pressing community health challenges. Those challenges, such as growing rates of obesity and diabetes, increase health care costs, diminish American productivity and competitiveness, and probably limit the opportunities available to the next generation of Americans because of increasingly poor health. Taking action as early and at the level of population, long before diabetes is diagnosed in one obese person, or chronic bronchitis4 is diagnosed in one smoker, is the most efficient and effective route to disease prevention. The nation needs to rely on public health departments to lead the effort to reduce the burden of preventable morbidity and mortality. It is important to consider why public health has not already done more in this regard. A large part of the answer is that only a small proportion of current public health financing targets the major causes of preventable morbidity and mortality in the 21st century. Partly as a result of the historic successes of public health against infectious diseases, today’s preventable disease bur- den is primarily the result of chronic disease, injury, and upstream social determinants. Although it is essential to ensure that funding continues to sustain hard-won public health achievements in maternal and child health, environmental sanitation and hygiene, and the prevention of infectious dis- eases, public health investments are needed to address the full array of high- 4A precursor of and part of chronic obstructive pulmonary disease.

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47 REFORMING PUBLIC HEALTH AND ITS FINANCING priority population health challenges, beginning with those most responsible for today’s and tomorrow’s preventable burden of disease. The Centers for Disease Control and Prevention (CDC) has analyzed its spending on the preventable burden of disease (Curry et al., 2006) and has found, for example, that although cardiovascular disease was the leading disease category, only 1.9 percent of CDC’s budget (allocated by Congress by specific categories) was spent on it. Table 2-1 illustrates the most recently available information on the misalignment between spending and disease burden. Although there has been some improvement in funding for chronic disease prevention, there remain large categories of relative underfunding (for example, for injuries, environmental health, and mental health). Given Congress’s budget compromise that removed $5 billion from the preven- tion and public health fund (Haberkorn, 2012) and the further reductions expected in authorizations, there is little hope that the funding problems will be resolved soon. An update of the work of Curry and colleagues would be an important contribution to ascertaining the extent to which public health funding (in CDC and preferably at all levels of government) is aligned with population health needs. A survey of 17 of the largest metropolitan health departments in the United States conducted by Georgeson and colleagues (2005) found that although “[c]hronic diseases account for 70% of all deaths nationwide on average, . . . the health departments surveyed allocated an average of 1.85% of their budgets to chronic disease” (2005, p. 183). Frieden and colleagues found “a gross mismatch between funding levels for different categories of diseases and the number of premature deaths caused by those diseases” TABLE 2-1 Funding Versus Preventable Burden of Disease, Ranked by Medical Cost Rank (by Fraction of CDC Amount in CDC costa 1997) Disease Category 2003 Budget, % 2003 Budget, $ Cardiovascular, circulatory 1 1.89 ~81.5 million Cancer 2 9.88 ~426.7 million Injury 3 4.95 ~213.9 million Mental health 4 0.19 ~8.4 million Endocrine and metabolic disorders (such 5 4.77 ~206.3 million as diabetes) Disability 6 3.04 ~131.2 million Chronic lung disease 7 1.50 ~64.8 million Infectious disease 8 70.48 ~3.0 billion aMedical cost (see Cohen and Krauss, 2003). SOURCE: 1997 and 2003 budget data from Curry et al., 2006.

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48 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE (2008, p. 974) in New York City. For example, emergency preparedness, tuberculosis, HIV, sexually transmitted infections, and vaccine-preventable diseases received various levels of federal funding, and diabetes, heart dis- ease, cancer, and tobacco control received no federal funding. The former group caused no or few deaths, whereas heart disease, cancer, and tobacco use were responsible for high numbers of deaths. Frieden and colleagues concluded that although maintaining funding for communicable disease control is crucial, “federal, state and local governments should also provide the funds necessary to implement effective programmes to prevent and con- trol chronic diseases” (2008, p. 974). The failure of public health to tackle the health issues that are result- ing in the relatively poor U.S. health rankings among comparable nations is primarily a financing failure. The United States gets the health outcomes that it chooses to pay for. The committee does not believe that the answer is simply to transfer resources from traditional public health domains to new programs. Although public health engagement in contemporary factors that contribute to health is essential, it should not occur at the expense of hard-won gains, such as victories over communicable diseases. Rather, the solution is more nuanced, involving a combination of efficiencies, financing reform and, ultimately, more resources. Before discussing those issues, how- ever, an important next question to address is whether there is evidence that public health could address the current challenges successfully if adequate resources were available. THE IMPACT OF PUBLIC HEALTH ACTION The history of public health attests to its ability to achieve major im- provements in population health. Historically, action on the leading causes of death and disability in the population has involved public health depart- ments at all levels working in collaboration with researchers, communities, clinical care providers, and other partners to collect data, plan and imple- ment programs, advocate for policy change, enforce laws, and ensure the delivery of services, such as immunizations and occupational safety. The public health infrastructure, including government agencies from CDC and the Food and Drug Administration to the local public health department, works to promote and protect the population against routine threats and to prepare against exceptional ones, such as bioterrorism and pandemics. As noted in earlier Institute of Medicine reports (IOM, 1988, 2003), state and local public health departments play special roles in ensuring that com- munities receive key public health services. The power of public health action is evident in its record of successful interventions, including public policy, that have achieved change in health risks and health outcomes. Examples previously discussed in the committee’s

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49 REFORMING PUBLIC HEALTH AND ITS FINANCING report on law and policy (IOM, 2011a) include the contributions of sanita- tion and universal childhood vaccination to improving child health and life expectancy; changes in social norms related to tobacco use and the decline in smoking rates; the effects of seatbelt, child restraint, and blood alcohol laws on motor vehicle injuries and fatalities; and the effect of fluoridation of drinking water on rates of tooth decay.5 In many cases, a lack of funding has resulted in insufficiently robust strategies to protect the health of the population and has led to considerable human and economic losses, some of which are described below. The committee was unable to find a comprehensive and detailed as- sessment of public health funding and the effects of fluctuations in it over the last few decades. But it did find evidence of the historical instability of public health funding and of the absence of a long-term commitment from Congress and state policymakers to sustain it. In their review of the his- tory of public health policy and funding, Fee and Brown (2002) and Frist (2002) found it filled with ups and downs—fluctuations that reflect major health threats of the moment, political winds, and economic realities. The broader context of government finance, however, is also one of competing priorities, frequent budget deficits, and currently, a serious economic crisis. Sessions, in Appendix D, summarizes several of the social and political fac- tors that have contributed to the government deficits that make it impos- sible to ensure adequate funding of public health, including globalization and increased competition for American business, political polarization, and the increasing economic and political influence of corporations. In the 1970s and 1980s, for example, public health suffered major cuts whose consequences were seen in part in an inability to mount an effective com- prehensive response to the HIV/AIDS epidemic. Fee and Brown concluded that “we have not learned the lessons of our public health history. We continue to mobilize episodically in response to particular threats and then let our interest lapse when the immediate crisis seems to be over” (2002, pp. 41-42). The defunding of public health tuberculosis control programs in the 1980s led to a resurgence of tuberculosis in 1985-1992 and cost New York City alone over $1 billion in 1991 dollars for efforts to control multiple- drug-resistant tuberculosis (Frieden et al., 1995; U.S. Congress, Office of Technology Assessment, 1993).6 Another example is found in the history of 5Additional examples include safer work environments due to changes in occupational safety, the decline in cardiovascular disease rates (owing to interventions on smoking, blood pressure, and cholesterol), maternal and infant health, the decrease in cervical cancer deaths due to screening, and the decrease in lead poisoning due to the removal of lead from paint and gasoline. 6The example of tuberculosis (TB) also shows inefficiencies in public health side, such as needless TB screening for schools, and directly observed therapy for all cases, among others.

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50 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE measles vaccination. In the decade or two after a measles vaccine was first licensed in 1963, funding for measles immunization became a function of the measles rate—as disease rates dropped, funding was decreased on the false assumption that the work was completed (Orenstein, 2006). Even as funding of measles vaccination stabilized and vaccination rates increased, access to vaccine services became the next challenge. A major measles epidemic in 1989-1991 became a rallying point for ensuring that adequate funding was available both to provide a higher level of first-dose coverage and to provide a second dose (in addition to policies requiring a second dose of measles vaccine before school entry) (Orenstein, 2006). Researchers have assessed the likely impact of funding cuts in specific areas of public health, such as vectorborne disease control and other infectious and chronic dis- ease control activities, and concluded that inadequate funding leaves public health departments ill equipped to prevent and control disease (LaBeaud and Aksoy, 2010; Meyer and Weiselberg, 2009). Perhaps one of the starkest examples of the association between fi- nancing and public health success is the national experience with tobacco control, one of the most dramatic successes—and failures—of public health. In 2004, CDC published a report on funding for tobacco control activities and found that support for this fundamental public health action was mea- ger: national spending on tobacco control averaged $1.22 per person, less than one-fourth of CDC’s recommended minimum of $5.98 (CDC, 2004). Multiplying the nearly $6 per capita by the current population of the United States, about 311.6 million people, even without translating it into 2011 dollars, yields about $1.9 billion. That amount pales in light of the fact that tobacco use costs the United States $96 billion a year in direct medical expenses and $97 billion in lost productivity and is the largest preventable cause of death and disease (CDC, 2011b). Although the relationship be- tween spending on tobacco control and smoking rates is complex—many factors are at work—there is no doubt that implementing multifaceted prevention efforts, as recommended by the U.S. Task Force on Community Preventive Services, requires adequate and sustained funding. There is sufficient evidence that when public health is adequately funded, it is capable of protecting and improving population health (Binder et al., 1999; CDC, 1999; Handler and Turnock, 1996; IOM, 2003; Mays et al., 2004). To make progress in improving population health, the nation’s health system needs to maximize the efficiency and effectiveness of the re- sources that are available for public health and recognize that the scope of the task is such that more resources will be needed. The remainder of this chapter will focus on the first of those two actions in the context of what is required for a strong public health infrastructure.

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51 REFORMING PUBLIC HEALTH AND ITS FINANCING DYSFUNCTION OF THE CURRENT PUBLIC HEALTH FUNDING SYSTEM The U.S. public health financing structure is broken. Well-financed health departments compete more effectively for public health financing. Many of the health departments in the poorest communities and communi- ties that have the poorest health outcomes are among the least-well-funded (Honoré and Schlechte, 2007; Mays and Smith, 2009; Meyer and Weisel- berg, 2009; Rehkopf and Adler, 2011; TFAH, 2011). Public health funding comes from separate appropriation processes at the federal, state, and local levels (Novick et al., 2008). There is little coor- dination among funders regarding the services and activities that are funded, and each funder has its own rules of accounting, performance, monitoring, and evaluation (Mays and Smith, 2009; Mays et al., 2004; Salinsky, 2010; Salinsky and Gursky, 2006). Little or no funding is available to advance the science base of public health service delivery or interventions (Brownson et al., 2009; Glasgow et al., 2003). The organization of governmental public health has developed in ways that reflect funder dictates, the flows of money, tightly compartmentalized programmatic categories, and the skill of public health leaders in “braiding” together disparate funding streams and finding new funding sources more closely than the needs of localities, including priorities based on communi- ties’ disease burdens, interests, and capabilities. Public health funding is a complex patchwork of funding streams, pur- poses, and funding mechanisms. Figure 2-1 and Appendix E illustrate public health funding in the United States; the structural issues are discussed in this chapter, and the specific financial aspects in Chapter 4. The committee focuses below on two key consequences of the current funding system dysfunction that are particularly problematic because they occur in combination: • C ompartmentalized inflexible funding, often competitive, which leaves many health departments without financing for key priorities or for needed cross-cutting capabilities (such as information systems and policy analysis). • U ncoordinated, usually discretionary funding from different levels of government with different rules for use. From a public health financing standpoint, there is no overall point of accountability and no agreement on or definition of a minimum package of services that all funders commit to ensuring in each state and locality.

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52 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE FIGURE 2-1 Public health funding flows. NOTE: This diagram is a high-level, generalized view but illustrates the major and minor sources and types of revenue that state and local health departments may receive. The federal governmentigure 2-1 F disburses funds to state health departments through multiple agencies (such as CDC and the Health Resources and Services Administration) Bitmapped and avenues, including block grants, programmatic grants, and competitive grants, for instance, Title V/Maternal Child Health, Title X/Family Planning, Public Health Emergency Preparedness/Assistant Secretary for Preparedness and Response funds, and the Preventive Health and Health Services Block Grant. The federal government also disburses funds directly to local health departments—typically larger, urban health departments, for example, Ryan White dollars to highly affected HIV/AIDS jurisdictions—or rural health departments—for example, rural health grants to support practice-based research. State health departments are also supported by user fines and fees and by funds from state government. State funds vary widely by state but typically take the form of discretionary or general funds, mandated spending in programmatic areas, or dedicated revenue, for example, from a state tax on cigarettes. Many of the funds are sent on to local health departments as “pass-through” funds from private organizations or federal programs; funds are also often sent in the

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53 REFORMING PUBLIC HEALTH AND ITS FINANCING Compartmentalized, Inflexible Funding A great deal of the funding received by public health departments is inflexible, and this precludes strategic alignment of funding from different sources and use of funds to establish or strengthen communication capa- bilities, information systems, and other elements that are needed in all or most programs (Salinsky and Gursky, 2006). The lack of flexibility is due in large part to the nature of much of public health funding—categorical, often competitive, funds that recipients must use for specified purposes and in prescribed fashions. The federal government provides funding to states and local govern- ments through two congressionally authorized approaches: (1) categorical grants, which cover a narrow array of eligible activities, and (2) block grants, which offer flexibility in the use of funds (Canada, 2002). In practice, categorical grants are the most widely used approach because Congress views block grants as lacking built-in accountability (Committee on Inspection and Evaluation, 1996). Block grants, for example, are not program-specific, lack oversight, and lack performance measures, all of which characteristics make them less attractive to Congress (OIG, 1995). However, one successful model of flexible funding streams is the Maternal and Child Health block grant. The primary purpose of categorical grants is to ensure that health departments allocate resources for specific activities and services. Categorical grants are thought to ensure recipient accountabil- ity to the federal government, to target federal money to defined national form of “core” support, as funding for specific programs at the local level, and as reimbursement for services performed by the local health departments on behalf of state health departments. Some local health departments also receive funds from other state or local agencies, for example, in states where Medicaid, substance abuse services, or environmental health services are separate from state health departments. Local health departments receive a substantial amount of their funding from city or county (or multicounty) governments. In addition to fees and fines, local health departments may contract out for services to other local agencies or provide services for which they bill other groups. As discussed in the committee’s second report, on law and policy (IOM, 2011a), there is significant variation in organization (and hence funding) among states; therefore, all these mechanisms vary widely by jurisdiction, so the relative importance of each funding source also varies. Some, like private sources, are generally very small sources of revenue. (See Appendix E for a more detailed diagram and further discussion.)

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54 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE objectives, and to facilitate “nationwide adoption of innovative programs” (OIG, 1995, p. 6). Beginning in the 1950s, public health financing decisions became more regionally based, and the federal government started to fund public health more regularly on the basis of emerging needs (such as the emergence of HIV and influenza) according to the priorities of Congress (Novick et al., 2008). Congress tends to prefer categorical funding because it allows tighter control. Advocacy groups and other supporters of categori- cal funding value the fact that it allows them “to concentrate their efforts on lobbying Congress rather than 50 state legislatures” (OIG, 1995, p. 5). Block grants are available to be administered directly at the state and local levels and therefore reduce some of the burdens of federal funding (such as administrative costs) and shift decision making to the states (CDC, 2011a; Kennan, 2008; OIG, 1995). However, block grants are unstable and vulnerable to decreases in funding and to elimination as a result of fiscal changes or shifts in political will. The president, the Senate, or Congress can call for their removal from the annual budget in attempts to cut costs (Kennan, 2008). Because block grants encompass a large number of com- bined programs and therefore do not include the specific ways in which the funds will be spent, it is easier for lawmakers to propose cuts in them without constituents’ being able to attach a specific program to the reduc- tions (Kennan, 2008). Funding of the Preventive Health and Health Services Block Grant has been stagnant or declining over the past two decades. It was funded at $87,047,000 in 1986, then had small increases until 1995 (topping off at $157,916,000), and has had small decreases in most years since then; 2010 funding was $102,034,000 (CDC, 2012b). Categorical funding for public health has been championed by many in public health for its ability to protect resources by dedicating them to important public health issues that might otherwise lose funding. Disease- specific grants, for example, lead to the development of a constituency that would advocate for the dedicated funds if they came under threat. How- ever, the rigidity of categorical funding often leads to the creation of what practitioners call programmatic “silos”—parallel activities and services that overlap, are duplicative and are inefficient (NACCHO, 2011b; Novick et al., 2008; OIG, 1995; PHI, 2010; Salinsky, 2012) and that reduce the ability to fund cross-cutting needs, such as information systems and communication or policy analysis capabilities (NACCHO, 2011b). Categorical funding may also limit the range of practice of public health departments; because categorical streams generally are not dedicated to the broader determinants of health, public health departments may not have funding to consider ac- tivities in this part of their purview (for example, gathering, analyzing, and disseminating information on transportation, housing, zoning, and other community factors that are known to be linked with health outcomes) (BARHII and PHLP, 2010).

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55 REFORMING PUBLIC HEALTH AND ITS FINANCING Funding strategies comparable with federal categorical funding are often used by state and local governments and present similar challenges. For example, studies of two large metropolitan health departments found that local government’s categorical funding does not provide support for basic public health services or core capacities (PHANYC, 2002; PHIP Fi- nance Committee, 2006). State categorical funding limits state and local health department flexibility to meet local needs and maximize impact and entails administrative burdens that require accountability as to how funds are spent and programs are structured rather than attempting to determine what outcomes and effects are achieved (LAO, 2010). Uncoordinated, Fragmented Government Funding Federal funds are the largest source of state health agency revenue (about 45 percent in FY 2009), about 60 percent of which goes to support local health departments and community-based organizations (ASTHO, 2011). In 2009, the remainder of funds came from state general funds (23 percent), other state funds (16 percent), fees and fines (7 percent), Medicaid and Medicare7 reimbursement (4 percent), and other sources (5 percent) (ASTHO, 2011). Federal funding for public health originates in congressional appropria- tions to the Department of Health and Human Services (HHS) (authorized by the Public Health Act, the Social Security Act, and other legislation) and the U.S. Department of Agriculture (USDA) (for the Women, Infants, and Children). HHS agencies—largely CDC, the Health Resources and Services Administration (HRSA), and the Substance Abuse and Mental Health Ser- vices Administration—direct funds to states and selected localities. Funding is overseen by individual program offices, and there are often distinct re- quirements from each office for use and reporting. In addition to the federal funding for states’ use, some federal funds “pass through” states on their way to local public health departments. At the local level funding is similarly complex. The National Associa- tion of County and City Health Officials (NACCHO) 2010 Profile of Local Health Departments estimates that the largest proportion of local public health department revenue (26 percent) comes from local government, 21 percent comes from state direct funding, and 14 percent from federal pass-through8 funds. The remaining 39 percent is made up of federal direct funding, Medicaid and Medicare reimbursement, fees, and other sources (NACCHO, 2011a). The NACCHO Profile report also found that 40 per- 7Medicare reimbursement of health departments that operate nursing homes. 8Federal pass-through funding refers to funds that come from the federal agencies to the state health department and are then transferred to the local level.

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64 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE USING FINANCING REFORM TO STRENGTHEN 21ST CENTURY PUBLIC HEALTH Meeting the challenges that are endangering the health and economic competitiveness of the United States ultimately depends on the sufficiency of funding for new and necessary public health competences and program- ming. It is beyond the scope of this report to provide the entire blueprint for such a process (which would include steps described elsewhere, for example, nurturing public health leaders, developing workforce competences, and strengthening the quality of public health practice (Honoré and Scott, 2010; Honoré et al., 2011). However, the financing reforms recommended here are crucial for enabling the recommendations of the committee’s two previous reports (IOM, 2011a,b) and the roles that public health departments play in improving the health of populations as • A source of knowledge and analysis on community and population health (part of the assessment function). • A convener, coalition-builder, and mobilizing force to build health considerations into all aspects of community planning and action (part of the policy development function). • A steward of the community’s health, assuring that policies and services needed for a healthy population are in place (part of the policy development function). • A partner of the clinical care delivery system in developing infor- mation about effectiveness and appropriateness of service delivery (part of the assurance function). Those roles of public health are not new, but the last item, referring to the relationship to clinical care, is an elaboration of work that public health departments have already undertaken to various degrees. This topic was introduced in the committee’s report For the Public’s Health: The Role of Measurement in Action and Accountability, and the discussion continues here. The last role has become more important and is a natural application of public health departments’ abilities. The committee recognizes, however, that considerable time and effort (training, planning, and so on) will be needed to enable public health departments to begin to perform all those roles effectively, and it acknowledges that various barriers will need to be addressed, including organizational culture, funding issues, questions of authority, and the potential for adversarial interactions. As outlined in the committee’s report on measurement, transforming governmental public health departments requires greater and more granular data and information that can be used to implement the functions of as- sessment, policy development, and assurance. Key knowledge and analytic capabilities specific to public health professional training and background

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65 REFORMING PUBLIC HEALTH AND ITS FINANCING must be focused sharply on assessing the health of populations. Informa- tion derived from assessment needs to be integrated with data gathered from other sources to develop a new understanding of associations and causality (IOM, 2011b; see Chapter 3 for further discussion). Public health professionals must turn knowledge into interventions that maximize health promoting conditions and curtail interventions that detract from a commu- nity’s health. Knowledge must be used to engage partners in influencing the actions and policies of private and public entities that are key to the health of communities (IOM, 2011a). As discussed in the committee’s report on law and policy, changes in regulations and in formal and informal policies in the public and private sectors all can be powerful tools for population health improvement (IOM, 2011a). Policy development requires an understanding of the political and social environment of a community and the contributions of community groups and organizations for policies to be built in a manner that is locally acceptable. Ideally, policies will be developed on the basis of empirical knowledge or strong theory of what approaches and interventions will be most successful in promoting and protecting health. Health departments need to be knowledgeable about evidence-based interventions and about how to adapt them appropriately to the needs of local communities. Public health departments as knowledge organizations also need capacity and skill in communication and mobilization, for example, to facilitate the develop- ment, enactment, and implementation of health-related policies that lead to behavior-oriented change (smoking bans, excise taxes intended to curb risky behaviors, such as smoking and alcohol abuse) and to more broad-based “health in all policy” efforts (such as altering the built environment to make neighborhoods more accessible to pedestrians and cyclists). THE RELATIONSHIP BETWEEN PUBLIC HEALTH AND CLINICAL MEDICINE: A NEW PARTNERSHIP The committee’s charge in this report is to “make recommendations for funding state and local public health systems that support the needs of the public after health care reform.” A central issue that the committee grappled with was its vision of the relationship between public health and the medical care delivery system in the context of health care reform (the implementation of the Affordable Care Act [ACA]12). In examining what is needed to produce an effective partnership be- tween public health and clinical care, the committee found that the rela- tionship requires both better integration and better differentiation. The committee’s report on data and measurement (IOM, 2011b) recommended 12Public Law 111-148; Public Law 111-152.

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66 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE collaboration between the two sectors to draw on the data (such as indica- tors of a community’s health) and expertise of public health to improve aspects of clinical care that are relevant to population health outcomes and to familiarize the public with the meaning of high-value (evidence-based, efficient, appropriate) care, in the form of local performance reports on the appropriateness, quality, safety, and efficiency of clinical care services delivered in their community.13 Some health departments that serve small populations may never achieve local capacity, knowledge, and skills for collaborating with clinical care counterparts; in some states or territories, it may require a more centralized function, but governmental public health nevertheless needs to provide information to the medical care system and to the public it serves on the effectiveness and efficiency of its operation. Cur- rent examples of this sort of interaction or integration between the public health and clinical care systems include • R eports of outlier rates of hospitalization for selected diseases. • U se of procedures consistent with predicted prevalence of popula- tion need. • C ancer and vaccine registries. • E vidence-based guidelines. • H ealth promotion and disease prevention for patients. Health care reform, through the ACA, also provides an opportunity for health departments to reassess their need to provide clinical services directly to vulnerable populations in their communities. Debates over clinical care service delivery in public health departments have gone on for several de- cades. The 2003 IOM report on public health emphasized that “adequate population health cannot be achieved without making comprehensive and affordable health care available” to everyone (IOM, 2003, p. 12). Although the provision of clinical services by health departments has been in decline for many years (NACCHO, 2010), about half the local public health de- partments (NACCHO, 2011a) still provide a range of clinical services to uninsured and underinsured individuals and families through their clinics, through health department–operated community health centers and feder- ally qualified health centers, and, less commonly, through health depart- ment–associated hospitals. In some departments, this activity accounts for the largest portion of the overall budget. In many localities, such a role is 13Recommendation 5 of that report (IOM, 2011b): “The committee recommends that state and local public health agencies in each state collaborate with clinical care delivery systems to assure that the public has greater awareness of the appropriateness, quality, safety, and efficiency of clinical care services delivered in their state and community. Local performance reports about overuse, underuse, and misuse should be made available for selected interventions (including preventive and diagnostic tests, procedures, and treatment).”

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67 REFORMING PUBLIC HEALTH AND ITS FINANCING viewed by the community and its decision makers as a central role of public health, and providing critical services for vulnerable populations in the com- munity can be beneficial for local political support. In addition, some public health departments have been able to defray overall departmental overhead expenses or possibly even cross-subsidize (pay for) key population-based services through reimbursement or fees collected for clinical care services, although the evidence of this is sparse (Elster et al. 2003, p. 186;14 OIG, 1999; Slifkin et al., 2001). The ACA, signed into law in March 2010, includes provisions to expand health care coverage, and improve quality in the health care delivery system (by changing incentives to support quality, system integration, administra- tive standardization, and coordinated care) (KFF, 2011). ACA provisions are intended to be phased in over a period of several years, with the final provision of the law becoming effective in 2020. It is likely to have far- reaching ramifications for safety net providers, such as public health depart- ments. Assuming full adoption, it is estimated that the ACA will expand health insurance coverage for as many as 32 million people (KFF, 2011), many through the mechanism of support for lower-income individuals. As the implementation of the ACA advances, the committee believes, other public and private providers will have increased capacity to provide care for formerly uninsured populations for whom governmental public health has served as a safety net provider. There are, of course, several caveats. At the time of this writing, several provisions of the ACA face congressional challenges on political and fiscal grounds and challenges from 26 states’ attorneys general (NCSL, 2012). The outcome of those challenges may affect the number of people who ultimately gain insurance. Even with full implementation of the ACA, 23 million people will remain uninsured (AcademyHealth, 2011; Hall, 2011; Herrick, 2011). In addition, in the short term, full implementation of the ACA will increase demand for primary care, and safety net capacity may be strained. Some issues may make it more appropriate for public health depart- ments to provide specific kinds of clinical services directly, for example, specialized programs that have a population health component, such as programs related to control of tuberculosis or sexually transmitted diseases, 14“Because public health departments do not have legally enforceable duties to individuals, they also have greater latitude to commingle funds and engage in cross-subsidization practices to keep their activities afloat. Thus, for example, a public health agency may pool revenues from grants, contracts, patient fees, and third party payments (most typically Medicaid) to support the provision of subsidized personal health-care activities for uninsured people. In this way, shortages in one area can be compensated for by budgetary reallocations of dollars where not prohibited by law. Because grant and contract funding for public health activities tends to be modest and because a large proportion of the patient population is poor, third party revenues, especially Medicaid, take on crucial importance” (Elster et al., 2003, p. 186).

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68 FOR THE PUBLIC’S HEALTH: INVESTING IN A HEALTHIER FUTURE and specialized services delivered in community settings, such as nurse home visiting or community worker health promotion activities. In this context, the ACA provides an important opportunity for health departments to forge new and stronger partnerships with the health care delivery system. The prominence of the focus on clinical care delivery was viewed by the committee as detracting from the ability of public health to take on other activities that are important for its mission and that others are less able to accomplish. However, the important and continued need for safety net ser- vices in many communities will require coordination between public health departments and public and private clinical care providers.15 Recommendation 4: The committee recommends that as clinical care provision in a community no longer requires financing by pub- lic health departments, public health departments should work with other public and private providers to develop adequate alternative capacity16 in a community's clinical care delivery system. FINANCING AND REFASHIONING PUBLIC HEALTH DEPARTMENTS Reforms in public health financing—not levels of funding but how funds are disbursed and used—also require changes in public health department organization. The organization of public health departments is critical for their successful functioning. It was not in the committee’s charge to explore organizational issues, but it notes that in a resource-constrained environ- ment, efficiency is obligatory, not only for financial health but for the ac- countability that the committee outlined in its previous reports. Many public health departments are too small to possess the founda- tional capabilities and to deliver the package of public health services needed for them to be fully operational and meet minimum performance measures or gain accreditation.17 Moreover, state–local coordination will be needed in some spheres, such as information technology (this has been discussed 15The committee notes that in some jurisdictions, the public health department operates federally qualified health centers or community health centers. 16Adequate capacity refers not merely to the ability to provide services of similar breadth, quality and accessibility (e.g., cultural competence), but in the context of providing care to the overall community and not on a patient-by-patient basis. 17As the committee has noted previously, 33 percent of local public health departments are staffed by fewer than 10 full-time employees, and 63 percent of 2,565 health departments surveyed in 2010 serve populations of fewer than 50,000 people (NACCHO, 2011a). San- terre (2009) found that the “minimum efficient scale” (the level of population associated with minimum health department efficiency) for a local health department occurs at a population of about 100,000, but 77 percent of local health departments, which serve about 18 percent of the total U.S. population, serve smaller populations.

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69 REFORMING PUBLIC HEALTH AND ITS FINANCING extensively in the literature on immunization registries, surveillance systems, and other information system components). Arrangements that would lever- age economies of scale for public health departments face multiple barriers, but there are various ways to help small departments to work with others to achieve greater capacity, such as consolidation and sharing resources (Kaufman, 2011; Libbey and Miyahara, 2011). As discussed in the commit- tee’s report on law and policy, some states have begun to implement or are considering such arrangements (see Bates et al., 2011; IOM, 2011a; Koh et al., 2008; New Jersey Department of Health and Senior Services, 2008; Stoto and Morse, 2008). Reform of financing to support foundational capacities and provide programmatic flexibility is a critical early step in refashioning governmental public health to live up to its fundamental mission of “fulfilling society’s interest in assuring conditions in which people can be healthy” (IOM, 1988). The approaches that the committee recommends for reforming cur- rent financing will likely foster organizational and infrastructure changes. Those changes alone, however, will not place governmental public health in a position to maximize its contribution to the efficient achievement of better health for the nation in the 21st century. Additional funding, to which the committee turns in Chapter 4, will also be required. In the next chapter, the committee describes tools needed to monitor and build organization and programmatic change and to assess the level of funding that will be required. REFERENCES Academy Health. 2011. The Impact of the Affordable Care Act on the Safety Net. Washington, DC: Academy Health. Armour, B. S., E. A. Finkelstein, and I. C. Fiebelkorn. 2009. State-level Medicaid expenditures attributable to smoking. Preventing Chronic Disease 6(3):A84. http://www.cdc.gov/pcd/ issues/2009/jul/08_0153.htm (January 6, 2012). ASTHO (Association of State and Territorial Health Officials). 2011. ASTHO Profile of State Public Health. Vol. 2. Washington, DC: ASTHO. BARHII (Bay Area Regional Health Inequities Initiative) and PHLP (Public Health Law and Policy). 2010. Partners for Public Health: Working with Local, State, and Federal Agen- cies to Create Healthier Communities. Oakland, CA: BARHII and PHLP. Bates, L., B. Lafrancois, and R. Santerre. 2011. An empirical study of the consolidation of local public health services in Connecticut. Public Choice 147(1):107-121. Bernet, P. M. 2007. Local public health agency funding: Money begets money. Journal of Public Health Management & Practice 13(2):188-193. Binder, S., A. M. Levitt, J. J. Sacks, and J. M. Hughes. 1999. Emerging infectious diseases: Public health issues for the 21st century. Science 284(5418):1311-1313. Boufford, J. I., and P. R. Lee. 2001. Health Policies for the 21st Century: Challenges and Recommendations for the U.S. Department of Health and Human Services. New York: Milbank Memorial Fund. Brooks, R. G., L. M. Beitsch, P. Street, and A. Chukmaitov. 2009. Aligning public health financ- ing with essential public health service functions and national public health performance standards. Journal of Public Health Management and Practice 15(4):299-306.

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