Kentucky Rural Health Works Program

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Recent columns in Economic and Policy Update have documented the benefits of a growing healthcare system on rural Kentucky economies. Hospitals, nursing homes, pharmacies, doctor's offices and other health facilities are important providers of jobs and income in local communities. However, nationally, a different debate is occurring. In 2000, health care expenditures constituted 13.2 percent of U.S. Gross Domestic Product (GDP) and is expected to increase to 13.9 percent by 2002.

Between 1990 and 2000, the number of uninsured Americans rose from 13.9 percent to 16.3 percent of the noneldery (RUPRI, 2000). Despite a brief respite in the mid-1990's, health care in inflation is now soaring again. In fact, while the share of health care in a local economy may be seen as a positive factor, the share of health care in US Gross Domestic Product (GDP) is often viewed as a negative factor. This brief is oriented towards understanding the impact of the national health care debate on rural health economies.

In 2001, insurance premiums rose by 11 percent and may increase by as much as 15 percent in 2002 (Tumulty, 2002). The rising cost of premiums and national recession are causing many Americans to lose their coverage. It is expected that up to 2 million Americans will lose health care coverage this year (Tumulty, 2002). As costs are rising, employers are expected to provide a stable or even lower share of insurance premiums. Currently, employer's pay about 15 percent of insurance premiums for individuals and 27 percent for families (Strunk, 2002). This number has stabilized after growing in the 1900's, due to a weaker labor market. Nationally, many, due to out-of-control costs and a growing insurance access problem, perceive a growing crisis.

Rural residents are at an even greater risk involving higher costs and less coverage. Rural residents rely more on self-insurance and small employers (Pol, 2000). These are the very groups that are more likely to experience higher than average insurance premium increases. Some statistics reveal the differences between rural and urban households:

1. Rural households are more likely than urban households to be employed in firms with less than 10 people (40.9% vs. 30.9%)
2. not with a private employer (76.7% vs. 82.5%) and self-employed (15.7% vs. 9.5%) (Pol, 2000).

Health care cost increases are likely to be more detrimental to the rural population and access to affordable health insurance.

While health care provides many jobs and a source of income for people in rural areas, lack of access to insurance is a troubling aspect of rural health care. Lack of insurance raises the costs of seeing a doctor or another health practioner and some individuals must resort to using the emergency room of hospitals for health care. Unfortunately, the ER is the most expensive form of care. Thus, a vicious cycle pervades of higher health care costs, less insurance and poorer health. Health status has an important role in the productivity of individuals in the workplace and in providing family care. Lost productivity, employment options and wages further hurts the local economy.

For rural Kentucky communities, a growing economic dependence on the health care sector and Medicare/Medicaid transfers means they have a critical stake in the national health care debate. Prescription drug coverage for senior citizens is a potential positive economic aspect of the health care debate. Rural communities may benefit if senior citizens can affords critical drug needs and are able to fill prescriptions in local communities. On the negative side, cutbacks and restrictions in Medicare and Medicaid, due to rising costs, may reduce income flows.

Rural communities are facing several challenges as the importance of the rural health sector in local economies grows. At the national level, health care costs are rising and insurance coverage is dropping. The public sector is under tremendous pressure to control costs and yet at the same time ensure Americans have insurance. All of these trends imply that major changes may be required. Given their potential dependence on health care as an economic sector, this could be a particularly serious blow to some rural economies. At the same time, access to coverage and rising health care costs are important issues for the economic well being of rural Kentucky citizens and communities. In either case, rural economies will be affected by changes in national and state health care policy. Rural communities have often paid attention to national agricultural, manufacturing and mining policy. It is time to widen our scope and begin to pay attention to the impact of the national health care debate on rural economies.

References

Pol, Louis. "Health Insurance in Rural America". Rural Policy Brief Vol.5 No. 11 August 2000. RUPRI Center for Rural Health Policy Analysis.

Strunk, Bradley, Paul B. Ginsberg and Jon R. Gabel. "Tracking Health Care Costs: Hospital Care Key Cost Driver in 2000". Center for Studying Health Care Change Data Bulletin 21, September 2001.

Tumulty, Karen. "Health Care has a Relapse". Time Magazine, March 2, 2002.