Health Care in Hawaii: Implications for National Reform (Letter Report,
02/11/94, GAO/HEHS-94-68).

For nearly 20, years, Hawaii has been a leader in the effort to achieve
universal access to health insurance. It is the only state that requires
employers to provide a minimum level of health insurance benefits to
employees, and its public programs cover many residents lacking
employment-based insurance. GAO makes several points. First, Hawaii's
employer mandate did not have a harmful effect on small businesses.
Second, although Hawaii's system of near-universal access has lowered
health premiums, its per capita health care costs have risen at a rate
similar to the national average. Third, Hawaii's experience suggests
that an employer mandate by itself will not necessarily result in
universal access to health care. GAO summarized this report in testimony
before Congress; see: Health Care in Hawaii: Implications for National
Reform, by Mark V. Nadel, Associate Director for National and Public
Health Issues, before the House Committee on Small Business.
GAO/T-HEHS-94-123, Mar. 16, 1994 (11 pages).

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-94-68
     TITLE:  Health Care in Hawaii: Implications for National Reform
      DATE:  02/11/94
   SUBJECT:  Health insurance
             Insurance premiums
             Health care cost control
             Health care services
             Physicians
             Health insurance cost control
             State-administered programs
             Comparative analysis
             National policies
             Health statistics
IDENTIFIER:  Hawaii
             Medicaid Program
             Hawaii State Health Insurance Program
             National Health Care Reform Initiative
             Clinton Health Care Plan
             Health Security Act
             
**************************************************************************
* This file contains an ASCII representation of the text of a GAO        *
* report.  Delineations within the text indicating chapter titles,       *
* headings, and bullets are preserved.  Major divisions and subdivisions *
* of the text, such as Chapters, Sections, and Appendixes, are           *
* identified by double and single lines.  The numbers on the right end   *
* of these lines indicate the position of each of the subsections in the *
* document outline.  These numbers do NOT correspond with the page       *
* numbers of the printed product.                                        *
*                                                                        *
* No attempt has been made to display graphic images, although figure    *
* captions are reproduced. Tables are included, but may not resemble     *
* those in the printed version.                                          *
*                                                                        *
* A printed copy of this report may be obtained from the GAO Document    *
* Distribution Facility by calling (202) 512-6000, by faxing your        *
* request to (301) 258-4066, or by writing to P.O. Box 6015,             *
* Gaithersburg, MD 20884-6015. We are unable to accept electronic orders *
* for printed documents at this time.                                    *
**************************************************************************


Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce, House of Representatives

February 1994

HEALTH CARE IN HAWAII -
IMPLICATIONS FOR NATIONAL REFORM

GAO/HEHS-94-68

Health Care in Hawaii


Abbreviations
=============================================================== ABBREV

  COBRA - Consolidated Omnibus Budget Reconciliation Act of 1985
  CPI - consumer price index
  CPS - Current Population Survey
  DSH - disproportionate share hospital program
  ERISA - Employee Retirement Income Security Act of 1974
  HCFA - Health Care Financing Administration
  HMSA - Hawaii Medical Service Association
  PHCA - Prepaid Health Care Act
  SHIP - State Health Insurance Program
  QUEST - Quality care, ensuring Universal access, encouraging
     Efficient utilization, Stabilizing costs, and Transforming the
     way health care is provided to public clients
  SSI - Supplemental Security Income

Letter
=============================================================== LETTER


B-256320

February 11, 1994

The Honorable John D.  Dingell
Chairman, Subcommittee on
 Oversight and Investigations
Committee on Energy and Commerce
House of Representatives

Dear Mr.  Chairman: 

Health care reform has risen to the top of the national domestic
policy agenda and many observers have cited Hawaii's health insurance
system as a possible model for the nation.  For almost 20 years
Hawaii has been a leader in the effort to achieve universal access to
health insurance.  It is the only state that requires employers to
provide health insurance for their employees, and it has public
programs to provide coverage to residents not insured through the
employer mandate. 

You asked us to provide information about Hawaii's experience on
topics central to the current debate on national health care reform. 
In response to your request, this report describes Hawaii's
experience with providing access to health insurance and health
services, its experience with health care costs, and the effects of
Hawaii's system on the state's small businesses and health care
providers.\1


--------------------
\1 You also asked us to provide information on the Medicaid
disproportionate share hospital (DSH) program in Hawaii.  The DSH
program was established in 1981 to provide for additional Medicaid
payments to hospitals that serve large numbers of Medicaid and other
low-income patients.  This information is in appendix V. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Hawaii has the highest level of insurance coverage of any state in
the nation.  Estimates of the percentage of Hawaii's residents
lacking health insurance in 1991 ranged from 3.75 to 7.0 percent in
comparison to the national average of about 14 percent. 
Nevertheless, Hawaii's employer mandate and government programs do
not ensure coverage for everyone in the state.  Further, even some
residents with insurance encounter problems obtaining access to
health services and need community health centers and other safety
net programs.  For example, private providers are not always willing
to serve Medicaid patients. 

Hawaii has experienced the same trend of rising costs as the rest of
the nation.  From 1972 to 1991, Hawaii's annual per capita health
care expenditure generally matched the national average.  However,
health insurance premiums are lower than in the nation as a whole and
in the last decade have risen more slowly in Hawaii than nationally. 
We identified two factors that contribute to lower premiums in
Hawaii:  reduced cost shifting and insurance companies' use of
modified community rating for small businesses. 

Hawaii's requirement that employers provide health insurance has not
resulted in large disruptions in Hawaii's small business sector. 
Business owners, however, have expressed concern about the cost and
inflexibility of the employer mandate.  Hawaii's successful
implementation of employer-based health coverage may have been helped
by a set of favorable circumstances, such as the large number of
employers already providing health insurance at the time the mandate
took effect.  Thus, if a national employer mandate is adopted,
Hawaii's experience might not be replicated throughout the country. 


   BACKGROUND
------------------------------------------------------------ Letter :2


      REQUIREMENT FOR
      EMPLOYER-SPONSORED HEALTH
      INSURANCE IS UNIQUE TO
      HAWAII
---------------------------------------------------------- Letter :2.1

Hawaii is the only state to require employers to provide health
insurance to their workers.  Its expansion of health insurance
coverage through the 1974 Prepaid Health Care Act (PHCA) was built on
a tradition of employer-based health benefits.  This tradition was
due partly to the strong role of labor unions in the work force and
partly to Hawaii's history of plantation medicine, when large
plantations employed physicians to provide free health care to their
workers.  Hawaii can require employers, including those that
self-insure, to provide a minimum level of health care benefits to
employees because it has a limited exemption from the federal
Employee Retirement Income Security Act of 1974 (ERISA).  ERISA
preempts state authority to regulate certain self-insured employer
health plans.  Hawaii is the only state with this exemption. 

Under PHCA, employers and employees share financing of premiums for
employee coverage, with the employee contribution limited to the
lesser of half the premium cost or l.5 percent of the employee's
gross wages.  In 1991, a worker earning the average annual wage of
$24,128 would have paid at most $30 per month, roughly one-third of
the premium cost for


individual coverage under a small business policy.  Employees must
elect the insurance unless they have comparable coverage from another
source.\2

PHCA outlines two broad categories of benefit plans that employers
may provide.  The first is an extensive package of medical, hospital,
and laboratory services that meets standards specified in the law.\3
Employers offering such a plan are not required to contribute to the
cost of coverage for dependents.  Employers have a second option of
providing a more limited state-approved benefits package,\4

but employers must then pay at least half the cost of dependent
coverage.  (See app.  I for a reproduction of parts I-V and chapter
12, title 12 of PHCA.)


--------------------
\2 Employees may also waive coverage for religious reasons. 

\3 The benefit package is defined as being equivalent to the most
prevalent plan provided by the major fee-for-service insurance
provider in the state, which is Hawaii Medical Service Association
(HMSA)--the Blue Cross and Blue Shield Plan of Hawaii--or that
provided by the major health maintenance organization, which is
Kaiser Foundation Health Plan, a nonprofit health maintenance
organization.  In December 1992, HMSA and Kaiser provided health
insurance for about two-thirds and one-fifth, respectively, of
Hawaii's insured employees. 

\4 These plans must still provide basic hospital, medical, surgical,
and other benefits, but are likely to require higher copayments or
deductibles or have preexisting-condition exclusions for a limited
period. 


      GOVERNMENT PROGRAMS
      SUPPLEMENT EMPLOYER MANDATE
---------------------------------------------------------- Letter :2.2

Individuals in Hawaii without employer-sponsored health insurance may
be eligible for either Medicaid or a state-subsidized insurance
program.  Hawaii's Medicaid program generally accepts people with
incomes up to 62.5 percent of the federal poverty level, while most
states set income eligibility at or below 50 percent of poverty,\5
and the program provides several optional Medicaid benefits.\6 The
State Health Insurance Program (SHIP) was established in 1989 to
provide health care coverage to the "gap group" of low-income
residents who are not covered by employer-sponsored health insurance
and are not eligible for Medicaid.  SHIP accepts people with incomes
up to 300 percent of the federal poverty level.  SHIP members with
incomes between 100 and 300 percent of poverty pay a share of the
monthly premium that is determined using a sliding scale; the state
pays the entire premium for members whose income is under 100 percent
of poverty.  Enrollment in SHIP is voluntary. 

Hawaii's average Medicaid-eligible population for fiscal year 1993
was about 101,000, about 9 percent of the population.\7 Because of
expanded federal eligibility for pregnant women, children, the
elderly, and the disabled, and because SHIP outreach activities
identified additional people eligible for Medicaid, about 22,000
enrollees were added to the Hawaii Medicaid program between 1988 and
1992. 

In December 1992, SHIP covered about 20,000 residents, roughly 2
percent of the population.  For most enrollees, SHIP provides minimal
and fairly restrictive health benefits that primarily cover
preventive care services such as well baby care.  SHIP covers 12
physician office visits per calendar year and in most cases limits
hospitalization coverage to 5 days.  Vision and dental services and
prescription drugs are generally not covered.\8

In July 1993, Hawaii received a waiver from the U.S.  Department of
Health and Human Services to conduct a 5-year public health care
demonstration project, the Hawaii Health QUEST\9 project, involving a
part of the Medicaid population and the entire SHIP population.\10
QUEST, scheduled to begin in April 1994, will combine these
populations under a managed care delivery system offering
comprehensive benefits similar to Medicaid benefits.\11


--------------------
\5 Hawaii's poverty level is $16,500 for a family of four; for all
other states, except Alaska, it is $14,350. 

\6 The options that Hawaii provides include programs for pregnant
women and infants whose family income is up to 185 percent of the
federal poverty level, and the elderly and disabled whose income is
up to 100 percent of the federal poverty level. 

\7 Percentage calculated using the July 1992 nonmilitary population. 

\8 HMSA and Kaiser both participate in SHIP.  Kaiser chose to provide
the full range of benefits of a federally qualified health
maintenance organization but limits SHIP enrollment to 3,500. 

\9 Quality care, ensuring Universal access, encouraging Efficient
utilization, Stabilizing costs, and Transforming the way health care
is provided to public clients. 

\10 QUEST will include the SHIP population and the Medicaid
population except those individuals currently in the aged, blind, and
disabled-related Supplemental Security Income (SSI) programs; refugee
cash and medical assistance programs; and medical payments for
pensioners programs.  Individuals in these categories will continue
to be eligible for and receive Medicaid services under the current
rules.  Under QUEST, the SHIP program, with the possible exception of
a small group, will be eliminated. 

\11 According to state officials, participants whose incomes are up
to 133 percent of the federal poverty level will not have to pay any
part of the monthly premiums.  Participants with higher incomes will
pay a portion of the premium according to a sliding scale, with
exceptions for pregnant women and infants under 1 year.  There will
be no copayments for children. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :3

We interviewed officials from four Hawaii government
departments--Health, Labor and Industrial Relations, Human Services,
and Commerce and Consumer Affairs--and the state's two major health
insurers--Hawaii Medical Service Association (HMSA) and Kaiser
Foundation Health Plan.  We also interviewed health care experts,
representatives of Hawaii's business community,\12 health care
providers, and officials from the U.S.  Bureau of the Census and the
U.S.  Department of Labor's Bureau of Labor Statistics.  We examined
the most recent data available from the state of Hawaii, HMSA,
Kaiser, the Bureau of the Census, the Bureau of Labor Statistics, the
Health Care Financing Administration (HCFA), and other sources. 


--------------------
\12 These included representatives of the Chamber of Commerce of
Hawaii, Small Business Hawaii, Hawaii Employers Council, and Hawaii
Business Health Council. 


   HIGHEST RATE OF COVERAGE, BUT
   NOT UNIVERSAL CARE
------------------------------------------------------------ Letter :4

Hawaii has the highest rate of health insurance coverage of any state
in the nation, but it does not have universal coverage.  This
widespread coverage is the result of the state's employer mandate,
the Medicaid program, and SHIP coverage for the gap group.  Estimates
of Hawaii's uninsured rate range from 3.75 percent in a 1991 survey
by the Hawaii Department of Health, to 7.0 percent in 1991,
determined from data from the Current Population Survey (CPS).  In
contrast, 14.1 percent of the nation's population was uninsured in
1991. 


      INSURANCE COVERAGE IS NOT
      UNIVERSAL
---------------------------------------------------------- Letter :4.1

Hawaii's employer mandate, even when combined with public programs,
does not ensure that all residents have health insurance.  The
employer mandate does not cover several categories of employees,
including part-time workers--those working fewer than 20 hours per
week--government employees, the self-employed, and low-wage
earners.\13 These individuals may choose not to purchase health
insurance.  In addition, waiting or enrollment periods\14 leave some
employed individuals temporarily without health insurance coverage. 

Hawaii's health care system also has gaps in insurance coverage for
the recently unemployed.  These individuals may be eligible to
purchase insurance through their prior employer under federal
statute\15 or through SHIP.  However, some unemployed individuals
elect not to participate because of the financial burden of paying
the premiums or because they expect to be re-employed shortly.  Other
individuals qualify for but do not take advantage of public programs. 
These individuals include some recent immigrants and homeless people. 

In addition, employed persons' dependents who do not qualify for
public programs may not be included in an employer-sponsored health
insurance plan.\16 A Deputy Director of the Hawaii Department of
Health told us that he would like to see PHCA modified to require
dependent coverage, but the limitation in the state's ERISA exemption
prevents the state from doing so.\17


--------------------
\13 Employers are not required to provide health insurance coverage
for workers whose monthly earnings are less than 86.67 times the
hourly minimum wage; that is, less than $456 per month in 1993. 
Other excluded categories are seasonal agricultural workers,
insurance and real estate salespeople working on commission,
individual proprietorship members in small family-run businesses, and
beneficiaries of government assistance programs. 

\14 The act does not require employer-sponsored insurance for newly
hired employees, those employed fewer than 4 consecutive weeks.  With
certain exceptions, people may enroll in SHIP during only one week
each quarter. 

\15 For firms with 20 or more employees, the Consolidated Omnibus
Budget Reconciliation Act of 1985 (COBRA) (P.L.  99-272) requires
that employers offering health insurance benefits provide former
participants and beneficiaries with an opportunity to elect continued
coverage when they would otherwise lose such coverage because of
"qualifying events" such as death, divorce, termination of
employment, or reduced hours.  The continuation period varies from 18
to 36 months, depending on the event.  The employee may be required
to pay for the premium, which may be no higher than 102 percent of
the group rate. 

\16 We could not obtain specific figures on the number of dependents
without this coverage.  Kaiser estimated that roughly two-thirds of
its groups pay all or part of dependent coverage for their employees
and HMSA told us that almost half of its group plan members,
excluding state and federal groups, are dependents.  In addition, a
1992 survey of 235 Hawaii businesses by the Hawaii Employers Council
reported that about three-fourths of these businesses pay at least
some portion of full-time employees' dependents' health insurance
premiums.  Preliminary results from a Kaiser Family Foundation survey
of small businesses indicate that dependents of full-time employees
were eligible for insurance coverage at slightly more than half of
the small businesses surveyed. 

\17 Hawaii's ERISA exemption applies only to PHCA as it was enacted
in 1974, thus precluding Hawaii from substantively amending it. 


      SOME HAWAII RESIDENTS HAVE
      LIMITED ACCESS TO CARE
---------------------------------------------------------- Letter :4.2

Despite having health insurance, some residents in Hawaii have
difficulty obtaining health care services.  Reasons for this access
problem include a limited number of providers in certain areas of the
state and a limited willingness on the part of private providers to
serve Medicaid patients. 

Although Hawaii has more physicians per capita than the national
average,\18 state officials and providers told us that these
physicians are not adequately distributed throughout the state,\19 a
problem shared with other states with rural populations.  This
problem is more complicated in Hawaii, however, because some Hawaii
residents require expensive air transport to another island to
receive necessary care.\20 For example, residents of Molokai and
Lanai must travel to another island for kidney dialysis. 
Comprehensive trauma facilities are also unavailable on these
islands. 

Residents covered by Medicaid face limited access to care in some
areas, even though providers are located in the vicinity.  Officials
from health care provider associations told us that private providers
generally limit the number of Medicaid patients they serve because of
Medicaid's low reimbursement rates.  State officials said that they
hope the new Hawaii Health QUEST project will improve this
population's access to care by increasing the compensation for
providing care and improving the availability of care on all the
islands.  Under QUEST, the state will contract with managed care
health plans to provide a full complement of health care services to
QUEST enrollees in all geographic areas. 

People who cannot obtain care from private providers may receive care
from community health centers.\21 These state and federally supported
nonprofit centers are designed to provide direct services to
hard-to-reach populations, such as the homeless, and those without
the ability to pay.  The preliminary results of a state survey of
uninsured seeking care from the centers reported that about 20
percent came to the centers because they did not have health
insurance and about 24 percent came to the centers because of their
low costs.  Primary care centers also provide some services, such as
language capabilities and outreach to the homeless, that are
generally not available from private providers.\22

Representatives of community health centers are concerned that the
new QUEST project could have a negative impact on the centers'
ability to provide needed services to their clients.  These centers
generally serve people living in the community and are run by
community-based boards of directors.  The representatives are
concerned that in the event the community health centers participate
as subcontractors of large managed care plans under QUEST\23

the centers will lose some of the local control that allows them to
adapt their services to the unique cultural and demographic
characteristics of the communities they serve.  In addition, the
representatives are concerned about the centers' financial viability
under QUEST. 

Center representatives believe that some of these problems would be
alleviated if an individual or a group of community health centers
could successfully bid to become a QUEST managed care plan
administrator.  However, they believe QUEST performance-bond and
geographic-coverage requirements are significant barriers to
successful center bids.\24


--------------------
\18 In 1991, Hawaii had 17.9 doctors of medicine and doctors of
osteopathy per 10,000 resident population, compared to the U.S. 
average of 15.7 per 10,000. 

\19 The federal government has recognized seven areas on five of the
state's six major islands as having a shortage of primary health care
professionals. 

\20 In emergency cases, Medicaid will pay for air transportation for
Medicaid patients. 

\21 State hospitals are also part of this safety net.  They are
required to accept all patients regardless of their level of
insurance coverage. 

\22 The state will require managed care plans under the Hawaii Health
QUEST project to contract with federally qualified health centers
unless the plan can demonstrate that it has both adequate capacity
and an appropriate range of services for vulnerable populations. 

\23 Center representatives said that they would like to bid directly
for QUEST as administrators of one or more managed care plans, but
cited financial and geographic coverage requirements as possible
barriers to health centers administering primary managed care plans. 

\24 The QUEST request for proposals requires successful bidders to
obtain a $1 million performance bond for the state to hold as
security against the proper performance of the contract.  The bond
will be adjusted according to the number of recipients enrolled. 
After adjustment, the bond must be sufficient to cover approximately
2 months of capitated payments.  A center representative estimated
that this would require a $2 million to $3 million bond.  Regarding
geographic coverage, successful bidders must accept recipients from
all geographic areas on a particular island, except on the island of
Hawaii, which due to its size is divided into two geographic regions. 


   OVERALL COSTS PARALLEL NATIONAL
   TREND BUT PREMIUMS ARE LOWER
------------------------------------------------------------ Letter :5

The cost experience in Hawaii is seemingly anomalous because, while
per capita health care costs are similar in Hawaii and the nation,
insurance premiums are lower in Hawaii.  PHCA was intended to expand
access to coverage, but it did not include explicit efforts to
control health care costs.\25

Per capita expenditures in Hawaii have been very similar to the
national average since 1974, and both have increased more rapidly
than the overall rate of inflation.  The same factors in the health
care economy have influenced this trend in Hawaii and the rest of the
nation.  At the same time, however, health insurance premiums are
generally lower in Hawaii than in the nation as a whole and have
risen at a slightly slower rate than nationally. 


--------------------
\25 Hawaii, however, does have certificate-of-need requirements for
hospital construction; changes in service; and major capital
equipment purchases, such as magnetic resonance imaging machines. 


      HAWAII PER CAPITA
      EXPENDITURES TRACK NATIONAL
      AVERAGE
---------------------------------------------------------- Letter :5.1

Hawaii's per capita health care expenditures continue to be similar
to national levels.  We reported earlier that Hawaii's per capita
health care expenditures from 1974 to 1982 tracked the national
average at the same time the state widened access to coverage through
its employer mandate.\26 Similarly, from 1980 to 1991, Hawaii's per
capita expenditures for hospitals, physicians, and prescription drugs
tracked the national average (see fig.  1).  Between 1980 and 1991,
those expenditures increased at an average annual rate of 9.8 percent
in Hawaii and 9.4 percent in the nation. 

   Figure 1:  Hawaii and U.S.  Per
   Capita Expenditures for
   Hospitals, Physicians, and
   Prescription Drugs (1980-91)

   (See figure in printed
   edition.)

Source:  Health Care Financing Administration. 


--------------------
\26 Access to Health Care:  States Respond to Growing Crisis
(GAO/HRD-92-70, June 16, 1992). 


      SAME FACTORS DRIVE UP HEALTH
      CARE COSTS IN HAWAII AND THE
      UNITED STATES
---------------------------------------------------------- Letter :5.2

In both Hawaii and the nation as a whole, health care costs have been
rising more rapidly than the average rate of inflation for other
goods and services (see fig.  2).\27

State officials, insurers, and health care providers told us that
Hawaii is not immune to the factors that have driven up health care
costs nationally.  These officials said that administrative costs are
high and rising; wages for health care professionals, particularly
nurses and some technical specialists, have risen significantly in
recent years; and medical equipment costs are rising due to advances
in technology.\28

   Figure 2:  Consumer Price Index
   (CPI) Medical Care Component
   for Honolulu and the United
   States Compared to Overall CPI
   (1975-93)

   (See figure in printed
   edition.)

Note:  The 1993 data are based on the first 6 months of the year.
With 75 percent of Hawaii's population, Honolulu is representative of
the entire state. 


--------------------
\27 Figure 2 uses the rate of inflation for Honolulu because
statewide data are not available.  The Honolulu data are
representative of Hawaii's experience because 75 percent of Hawaii's
population resides there. 

\28 We reported on the roles of technological advances and
administrative costs in the growth of hospital costs nationwide in
Hospital Costs:  Adoption of Technologies Drives Cost Growth
(GAO/HRD-92-120, Sept.  9, 1992). 


      COST OF MEDICAID PROGRAM HAS
      ESCALATED
---------------------------------------------------------- Letter :5.3

The cost of Hawaii's Medicaid program has increased significantly in
the past few years.  During this period, Medicaid expenditures
nationwide also rose dramatically (see table 1).\29



                           Table 1
           
              Growth in Hawaii and U.S. Medicaid
                         Expenditures


                                        1990    1991    1992
------------------------------------  ------  ------  ------
Hawaii                                   17%     10%     32%
U.S.                                     18%     27%     30%
------------------------------------------------------------
Source:  Hawaii State Department of Human Resources; Health Care
Financing Administration (HCFA). 

In fiscal year 1992, Hawaii experienced a shortfall in its Medicaid
budget, requiring the state legislature to appropriate an additional
$64 million to cover costs.  Most of the upsurge in Hawaii's Medicaid
costs occurred because of increased enrollment prompted by expanded
federal program eligibility, Hawaii's recent economic downturn, and
the SHIP outreach program, which enrolled additional eligible people
in the Medicaid program.  The cost per Medicaid beneficiary also
increased; from fiscal year 1989 to fiscal year 1991, Hawaii's
average cost per recipient rose between 7 and 9 percent each year,\30
primarily due to the escalating cost of health care.  (See app.  II
for additional information on the costs of Hawaii's Medicaid
program.)


--------------------
\29 Nationwide, Medicaid enrollment increased by 2.7 million
beneficiaries from fiscal year 1990 to fiscal year 1991; the largest
single-year increase in the program since the mid-1970s. 

\30 From 1988 to 1991, nationwide Medicaid expenditures per capita
grew at an average annual rate of 12.3 percent. 


      HEALTH INSURANCE PREMIUMS
      LOWER IN HAWAII
---------------------------------------------------------- Letter :5.4

Health insurance premiums are lower and have been rising less rapidly
in Hawaii than in the nation as a whole (see fig.  3).  In 1991,
annual premiums for three of the most prevalent health plans in
Hawaii--one large-business plan and two small-business plans--were
lower than the U.S.  average cost of $1,604 for comparable coverage
by $358 to $396 (see fig.  4).  Because the figure for the national
average includes costs for both large and small companies--and
premiums for large companies typically cost less than those for small
companies--the lower cost for the two Hawaii small-business plans is
especially notable.  Moreover, insurance officials in Hawaii told us
that premiums for small businesses in Hawaii are not much different
from those for large businesses. 

   Figure 3:  Average Annual
   Increases in Kaiser Hawaii and
   HMSA Premiums Compared to the
   United States (1984-92)

   (See figure in printed
   edition.)

Note:  Data for Hawaii are based on annualized changes for single
coverage plans for 1984-92. 

Sources:  Kaiser Foundation of Hawaii, HMSA, and Foster Higgins
Health Care Benefits Survey for 1984-92. 

   Figure 4:  Annual Medical Plan
   Costs for Single Coverage in
   Hawaii Compared to the United
   States in 1991

   (See figure in printed
   edition.)

Source:  Kaiser Foundation of Hawaii, HMSA, and 1991 Wyatt COMPARE
Data Base. 

Several factors may contribute to Hawaii's lower premium costs.  One
is the reduced amount of cost shifting in Hawaii.  In general, health
care providers pass on the cost of providing uncompensated care to
patients with private insurance coverage.  Because relatively few
Hawaii residents are uninsured, the need for people with insurance to
cover such extra costs is minimized.  As a result of the state's
requirement that all eligible employees accept health insurance,
healthy people cannot opt out of the system.  Total health care
costs, therefore, are spread over wider risk pools that include both
healthy and less healthy people.  An additional factor that lowers
costs for many small businesses is the major insurers' use of
modified community rating for small businesses.\31 (See app.  III for
detailed information on health insurance premiums in Hawaii.)


--------------------
\31 When insurers use community rating, they base premiums on the
anticipated health care utilization of all subscribers in a
particular geographic area or other broad grouping.  This contrasts
with the more common practice of experience rating, in which insurers
base premium rates on the medical experience of each insured group. 
The major fee-for-service insurer in Hawaii uses a system of modified
community rating for businesses with fewer than 100 employees.  Small
businesses are placed in one large risk pool, but their premiums may
be adjusted up or down by up to 20 percent, depending on their
utilization.  For large businesses, however, Hawaii's major insurers
determine rates from a company's experience.  This results in a wider
range of insurance premiums for large companies, with some large
businesses paying higher premiums than small ones. 


   SMALL BUSINESSES REPORT LITTLE
   ADVERSE IMPACT FROM EMPLOYER
   MANDATE
------------------------------------------------------------ Letter :6

Most small businesses in Hawaii expressed general satisfaction with
the Hawaii health insurance system, but they regard the mandatory
provision of insurance as a burden.  We found no evidence that the
employer mandate resulted in large disruptions in Hawaii's small
business sector.\32

Preliminary results from a Louis Harris and Associates, Inc.  survey
of small businesses\33 in Hawaii conducted for the Kaiser Family
Foundation\34 found that taxes and health insurance are viewed as the
top two problems facing small business.  Fifty-six percent of small
businesses that were surveyed considered the cost of health insurance
to be a major problem--more than any other government requirement.\35
However, more small businesses in Hawaii considered the inflation of
their health care costs to be under control (54 percent) rather than
out of control (41 percent).\36 This is a more favorable view than
the view of small businesses in the rest of the country, 62 percent
of which characterized the inflation of their health care costs as
somewhat or totally out of control. 


--------------------
\32 State officials point to the limited use of a State Premium
Supplementation Fund as evidence that Hawaii's employer mandate has
not overburdened small businesses.  PHCA established the fund to
subsidize employers with fewer than eight employees, and to pay
health care benefits for employees of bankrupt or noncompliant
employers.  Since July 1975, the state has paid less than $110,000
from this fund.  However, business leaders told us that few
businesses knew of the existence of the fund until recently, and
state officials said that the limitations on the use of the fund are
very restrictive.  Consequently, the use of the fund may not be a
good indicator of the effect of the mandate on small businesses. 

\33 These were businesses with 100 or fewer employees; firms of this
size employ over half of the state's work force. 

\34 Kaiser/Harris Survey of Small Business Owners in Hawaii, 1993
(preliminary findings). 

\35 Other requirements include worker's compensation, unemployment
compensation, and occupational safety and health requirements. 

\36 Forty-six percent of the companies surveyed in Hawaii considered
health care cost inflation to be somewhat under control and 8 percent
considered these costs to be completely under control. 


      BUSINESSES DISLIKE SYSTEM
      INFLEXIBILITY
---------------------------------------------------------- Letter :6.1

Business leaders we interviewed had two complaints related to the
inflexibility of the health insurance mandate.  First, they were
unhappy about the current cap on required employee contributions. 
Because the level of the cap is 1.5 percent of gross pay, employers
pay most of the health insurance premiums.  Some employers opt to pay
the entire premium.  Second, since the passage of the 1974 act, five
new mandated benefits have been included in the state insurance
code,\37 and businesses are concerned about what they regard as an
escalating trend of new mandated benefits. 

Business leaders we interviewed disliked the inflexibility of the
mandated benefits--they would prefer to tailor health benefits to the
needs of their particular employees.  For example, employers cannot
delete a mandated benefit, such as well-baby care, that may not suit
their employees, in order to provide additional benefits, such as
dental care. 


--------------------
\37 These benefits are well-baby care, in vitro fertilization,
mammogram screenings, mental health and substance abuse treatment,
and newborn adoptee coverage. 


      INSURANCE MANDATE HAS LITTLE
      EFFECT ON EMPLOYMENT
      PRACTICES
---------------------------------------------------------- Letter :6.2

Policymakers and business representatives often express concerns
about the effect of an employer mandate on employment practices,
including possible reliance on part-time workers, overall employment
levels, and effects on salary and other benefits.  Because mandatory
insurance is required only for employees who work at least 20 hours a
week, Hawaii's mandate could cause firms to hire more part-time
workers.  Three of 10 businesses questioned by the Louis Harris
survey reported that in the past 2 years they have hired people for
fewer than 20 hours a week primarily to avoid the cost of providing
health insurance.  However, business leaders told us that hiring
part-time workers causes additional administrative burdens and,
therefore, has not become a prevalent practice in most industries. 
The Bureau of Labor Statistics reports that the percentage of
part-time workers in Hawaii (which it defines as those working fewer
than 35 hours per week) has been lower than or comparable to the
average for the rest of the country over the past several years.  In
1992, 18.2 percent of Hawaii's work force was employed part-time,
compared to 19.2 percent nationwide.\38

More than three-fourths of small businesses surveyed by Louis Harris
reported that the mandate has had little to no effect on employment
levels, salaries, or other benefits.  Nonetheless, about one-fifth of
small businesses said that they hired workers who already had
insurance through a spouse or another employer, in order to avoid the
cost of insuring that worker.  Many economists have argued that
mandated employer-based benefits do cause a change in wage
structures:  a higher portion of worker compensation will be in the
form of benefits and a smaller portion in the form of take-home
wages.\39 Average wages in Hawaii are below the national average, but
whether this is attributable to the health care mandate or to other
variables is not known.  (See app.  IV for additional information on
economic trends in Hawaii.)

Business leaders we interviewed said that because of Hawaii's low
unemployment rate--below 5 percent in July 1993--employers would
offer health insurance without the employer mandate to compete for
qualified workers.  Indeed, when the employer mandate took effect,
neither HMSA nor Kaiser experienced unusually large enrollment
increases, according to HMSA and Kaiser officials.  However, the
business leaders acknowledged that the mandate may be preventing some
employers from dropping health insurance coverage, particularly
during economic downturns. 


--------------------
\38 Because neither the State of Hawaii nor federal agencies report
data on the percentage of workers who are employed fewer than 20
hours per week, data were not readily available to independently
determine if a change in the percentage of workers employed fewer
than 20 hours a week has occurred since PHCA took effect. 

\39 Victor R.  Fuchs, "National Health Insurance Revisited," National
Bureau of Economic Research Working Paper #3884 (1991); Lawrence H. 
Summers, "What Can Economics Contribute to Social Policy?  Some
Simple Economics of Mandated Benefits," AEA Papers and Proceedings,
Vol.  79, No.  2 (1989), pp.  177-183; and Economic Implications of
Rising Health Care Costs, Congressional Budget Office (1992), pp. 
34-39. 


   PROVIDERS GENERALLY SATISFIED
------------------------------------------------------------ Letter :7

Health care providers we interviewed were generally satisfied with
Hawaii's health care system because the widespread insurance coverage
has decreased the amount of uncompensated medical care.  However,
providers were concerned about the effect of low compensation from
public programs, such as Medicaid, which results in their shifting
costs to patients with private insurance.  The president of one
provider association said that he is hopeful that the new Hawaii
Health QUEST project will address this problem but was cautious about
expecting the problem to be solved. 


   IMPLICATIONS FOR HEALTH CARE
   REFORM
------------------------------------------------------------ Letter :8

Hawaii's experience offers three lessons: 

  Hawaii's experience indicates that an employer mandate by itself
     will not necessarily result in universal access to health care. 
     Other publicly sponsored programs are necessary to reach
     residents who are not able to obtain health insurance at work or
     who are unemployed.  Even if everyone has insurance, special
     programs may be necessary to assure that all residents have
     adequate access to health services. 

  Hawaii's system of near-universal access has resulted in lower
     health insurance premiums, particularly for small businesses. 
     However, Hawaii's PHCA did not have explicit cost-control
     provisions, and Hawaii's health care costs have risen at a rate
     similar to the national average. 

  In Hawaii, the one state with an employer mandate, the mandate has
     not created large dislocations in the small business sector. 
     However, factors unique to Hawaii may have contributed to this
     outcome.  For example, Hawaii's tradition of employer-provided
     benefits means that Hawaii may have started with a higher
     percentage of insured individuals than the United States has
     now.  Additionally, at the time Hawaii introduced its employer
     mandate, the cost of providing health insurance was
     significantly lower than it is today. 


---------------------------------------------------------- Letter :8.1

We discussed the results of this review with officials in the Hawaii
Departments of Human Services and Health, as well as officials from
the major insurers and representatives of primary care centers.  They
generally agreed with the information presented.  We have
incorporated their comments where appropriate.  Additionally we sent
a draft of this report to the Director of the Hawaii Department of
Health for review; however, we did not receive any further comments. 

We carried out our work from July to November 1993 in accordance with
generally accepted government auditing standards. 


As agreed with your office, unless you publicly announce its content
earlier, we plan no further distribution of this report until 30 days
after its issue date.  At that time, we will send copies of this
report to the Director, Office of Management and Budget, and
interested congressional committees.  We will also make copies
available to others on request.  Please call me on (202) 512-7119 if
you or your staff have any questions about this report.  Major
contributors are listed in appendix VI. 

Sincerely yours,

Mark V.  Nadel
Associate Director, National
 and Public Health Issues




(See figure in printed edition.)Appendix I
HAWAII PREPAID HEALTH CARE ACT
============================================================== Letter 



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


HAWAII'S MEDICAID PROGRAM
========================================================== Appendix II

Hawaii established its Medicaid program in 1966 under title XIX of
the Social Security Act.  Initially, the state used government
salaried physicians, hospital outpatient clinics at nonprofit
hospitals, and state-owned facilities to serve Medicaid recipients. 
Later in the 1960s, the program moved from exclusively using
government health care providers to giving recipients a choice of
public and private providers.  The State Department of Human Services
oversees Hawaii's Medicaid program and the Hawaii Medical Services
Association serves as the program's fiscal agent--the agency that
administers the program's claims processing functions. 

The greatest number of Medicaid recipients live on the island of
Oahu; however, the islands of Molokai and Hawaii have the highest
percentage of Medicaid recipients when compared to their total
populations.  In fiscal year 1992, nearly 24 percent of Molokai's
residents were covered by Medicaid and approximately 14 percent of
the island of Hawaii's residents were on Medicaid.\1 The island of
Lanai has both the lowest number of Medicaid recipients and the
lowest percentage of recipients (4 percent). 

HAWAII'S MEDICAID-ELIGIBLE
POPULATION IS RISING

Hawaii's Medicaid-eligible population grew significantly over the
past few years.  Hawaii's average monthly Medicaid-eligible
population rose from 72,070 in fiscal year 1989 to about 101,000 in
fiscal year 1993.  The expansion in eligibility, combined with
outreach activities for the State Health Insurance Program,
contributed significantly to the increase in the number of residents
identified as eligible for Medicaid.\2 Table II.1 shows the average
monthly Medicaid-eligible population for fiscal years 1989 through
1993. 



                          Table II.1
           
               Hawaii Average Monthly Medicaid-
           Eligible Population (Fiscal Years 1989-
                             93)


                        1989    1990    1991    1992    1993
--------------------  ------  ------  ------  ------  ------
Average monthly       72,070  73,364  74,573  88,260  101,00
 eligible population                                     0\a
------------------------------------------------------------
\a State of Hawaii Department of Human Services estimate. 

Source:  State of Hawaii Department of Human Services and annual
Medicaid Report for the State of Hawaii. 

With the rise in the number of Hawaii residents eligible for Medicaid
came an increase in Medicaid expenditures and the total amount of
Medicaid benefits paid to providers.  While providers consider
Medicaid reimbursement rates to be low in Hawaii, the rates are
slightly higher in the state than they are nationally.  Table II.2
compares the fees paid to providers by Medicaid in Hawaii to the
average fees paid by Medicaid in the nation as a whole. 



                          Table II.2
           
              Ratio of Medicaid Maximum Fees to
                   Private Fee Levels, 1990

                                                      United
                                          Hawaii      States
--------------------------------------  --------  ----------
Primary care                                0.58        0.62
Hospital visits                             0.57        0.49
Surgery                                     0.61        0.49
OB-Gyn                                      0.63        0.57
Laboratory                                  0.66        0.52
Imaging                                     1.02        0.58
All services                                0.63        0.59
------------------------------------------------------------
Source:  The Urban Institute, State-Level Data Book on Health Care
Access and Financing (1993). 

Hawaii experienced increases in expenditures for all types of
services for Medicaid recipients from fiscal year 1990 to fiscal year
1992.  The largest increase in actual cash payments occurred for
hospital outpatient services--a 54.7 percent increase from fiscal
year 1991 to fiscal year 1992.  HMSA attributed this increase to the
greater number of recipients using these services.  See table II.3
for a summary of total Medicaid expenditures and table II.4 for
information about the growth in Medicaid enrollment and expenditures
in Hawaii and the United States. 



                          Table II.3
           
           State and Federal Medicaid Expenditures
              for Hawaii (Fiscal Years 1989-92)

                    (Dollars in Millions)


                          1989      1990      1991      1992
--------------------  --------  --------  --------  --------
Hawaii                  $109.2    $128.9    $141.6    $183.5
Federal                   98.0     113.1     125.1     169.6
============================================================
Total                    207.2     242.0     266.7     353.1
------------------------------------------------------------
Source:  State of Hawaii Department of Human Services. 



                          Table II.4
           
              Average Annual Growth in Medicaid
             Enrollment and Expenditures (Fiscal
                        Years 1988-90)

                                                      United
                                          Hawaii      States
------------------------------------  ----------  ----------
Enrollment                                 1.82%       5.20%
Expenditures                               13.67       15.84
Expenditures per enrollee                  11.64       10.11
------------------------------------------------------------
Source:  Health Care Financing Administration. 


--------------------
\1 The fiscal year 1992 figures were the most recent figures
available from the state and HMSA. 

\2 In 1989, Hawaii expanded its Medicaid eligibility to include such
optional groups as pregnant women and infants with family incomes
less than or equal to 185 percent of poverty, and the elderly and
disabled whose income is less than or equal to 100 percent of
poverty. 


PREMIUM HISTORY OF PREVALENT
INSURANCE PLANS IN HAWAII
(1984-93)
========================================================= Appendix III


             Monthly     Percent     Monthly     Percent     Monthly     Percent
             premium      change     premium      change     premium      change
--------  ----------  ----------  ----------  ----------  ----------  ----------
1984          $52.92                  $47.52                  $52.92
1985           67.92      28.34%       47.52       0.00%       67.92      28.34%
1986           61.62       -9.28       55.72       17.26       61.62       -9.28
1987           63.88        3.67       64.70       16.12       63.88        3.67
1988           66.24        3.69       73.12       13.01       66.24        3.69
1989           72.68        9.72       87.58       19.78       72.68        9.72
1990           90.36       24.33       94.62        8.04       90.36       24.33
1991          100.70       11.44      101.58        7.36      103.80       14.87
1992          107.20        6.45      109.72        8.01      117.65       13.34
1993          115.49        7.73      128.38       17.01      130.49       10.91
--------------------------------------------------------------------------------
Note:  All premiums are for individual coverage. 

\a Kaiser Foundation Health Plan. 

\b Hawaii Medical Service Association. 

Source:  Kaiser Foundation Health Plan and Hawaii Medical Service
Association. 


GENERAL EMPLOYMENT AND BUSINESS
DATA:  HAWAII COMPARED TO THE
UNITED STATES
========================================================== Appendix IV

Data that would permit a definitive evaluation of the Prepaid Health
Care Act's effect on Hawaii's businesses have not been developed. 
However, some key employment indicators show that Hawaii has done as
well or better than the United States as a whole.  This appendix
contains data on these economic indicators.  Table IV.1 shows that
from 1976 to 1992, Hawaii's part-time employment rate has remained
close to the U.S.  average, and table IV.2 demonstrates that since
1980 Hawaii's unemployment rate has been markedly lower than the U.S. 
average.  Indexed growth rates from 1970 to the present for total
private employment and employment in retail and wholesale trades show
that Hawaii outstrips the U.S.  average (figures IV.1 and IV.2). 



                          Table IV.1
           
           Part-Time Employment Rates in the United
             States and Hawaii, 1976-1992 Annual
                           Averages


                                            United
                                            States    Hawaii
--------------------------------------  ----------  --------
1976                                          18.4      18.6
1977                                          18.3      17.9
1978                                          18.0      18.0
1979                                          17.9      17.4
1980                                          18.7      19.0
1981                                          19.0      18.6
1982                                          20.5      19.2
1983                                          20.3      18.1
1984                                          19.2      20.0
1985                                          19.0      20.3
1986                                          19.0      19.2
1987                                          18.8      20.0
1988                                          18.7      19.0
1989                                          18.5      16.8
1990                                          18.5      16.0
1991                                          19.2      16.1
1992                                          19.2      18.1
------------------------------------------------------------
Source:  U.S.  Department of Labor, Bureau of Labor Statistics. 



                          Table IV.2
           
           Unemployment Rates in the United States
            and Hawaii, 1976-1992; Annual Averages
            and First 6 Months of 1993, Seasonally
                           Adjusted

                                            United
                                            States    Hawaii
--------------------------------------  ----------  --------
1976                                           7.7       9.8
1977                                           7.1       7.3
1978                                           6.1       7.7
1979                                           5.8       6.3
1980                                           7.1       4.9
1981                                           7.6       5.4
1982                                           9.7       6.7
1983                                           9.6       6.5
1984                                           7.5       5.6
1985                                           7.2       5.6
1986                                           7.0       4.8
1987                                           6.2       3.8
1988                                           5.5       3.2
1989                                           5.3       2.6
1990                                           5.5       2.8
1991                                           6.7       2.8
1992                                           7.4       4.5
1993                                           7.0       4.7
------------------------------------------------------------
Source:  U.S.  Department of Labor, Bureau of Labor Statistics. 

   Figure IV.1:  Total Private
   Employment, Hawaii and the
   United States (1970-92)

   (See figure in printed
   edition.)

Source:  U.S.  Department of Labor, Bureau of Labor Statistics. 

   Figure IV.2:  Retail and
   Wholesale Trade Employment,
   Hawaii and the United States
   (1970-92)

   (See figure in printed
   edition.)

Source:  U.S.  Department of Labor, Bureau of Labor Statistics. 


MEDICAID DISPROPORTIONATE SHARE
HOSPITAL PROGRAM IN HAWAII
=========================================================== Appendix V

Hospitals that serve large numbers of Medicaid patients can face
significant financial burdens because Medicaid generally reimburses
providers at a lower rate than other insurers.  To reduce the burden,
the Congress established the Medicaid disproportionate share hospital
program (DSH) in 1981.\1 The program allows states to designate
hospitals treating large numbers of low-income patients as
"disproportionate share hospitals" and to give these hospitals
additional Medicaid reimbursement. 

Federal legislation gives states minimum criteria and formulas for
identifying hospitals that qualify for disproportionate share status. 
This legislation requires states to consider the amount of charity
care provided by the hospitals when deciding if they qualify as
disproportionate share hospitals and in calculating their
reimbursements.  Each state chooses the formulas that are used to
qualify hospitals for disproportionate share status and to determine
the amount of funds these hospitals receive.\2 In Hawaii, 23 of the
28 acute care facilities in the state received disproportionate share
payments in fiscal year 1992.  (See table V.1 for data on hospitals'
Medicaid utilization, revenues, and income in fiscal year 1992.)

In recent years, disproportionate share payments have climbed rapidly
in Hawaii.  State officials attribute this increase to Hawaii's
decision to designate as disproportionate share hospitals those
facilities that derived more than $100,000 of annual revenue from
public funds for the care of low-income patients.  Total
disproportionate share payments in Hawaii rose from almost $8 million
in fiscal year 1991 to over $40 million in fiscal year 1992 (see
table V.2). 




                          Table V.1
           
             Medicaid Utilization, Revenues, and
                  Income (Fiscal Year 1992)

                              Medicaid
                            utilizatio
                                     n        Net        Net
                                  rate    patient     income
Hospital location and name   (percent)   revenues     (loss)
--------------------------  ----------  ---------  ---------
Island of Hawaii
Hilo Hospital\a                  13.64  $48,834,0  4,995,302
                                               80
Honokaa Hospital\a                1.91  1,958,418    328,212
Kau Hospital\a                   16.00    880,418    205,468
Kohala Hospital\a                 0.89    586,054  (1,704,45
                                                          7)
Kona Hospital\a                  17.93  19,901,04    955,017
                                                3
Island of Kauai
Kauai Veterans Memorial          10.71  1,589,644  (6,185,93
 Hospital\a                                               6)
Samuel Mahelona Memorial             0  3,754,345  (298,725)
 Hospital\a
Wilcox Memorial Hospital\b       12.28  32,982,58  (173,593)
                                                7
Island of Lanai
Lanai Community Hospital\a       34.02    513,311  (166,872)
Island of Maui
Maui Memorial Hospital\a          9.47  38,767,59  1,147,543
                                                8
Island of Molokai
Molokai General Hospital\b          \e  2,152,068  (1,398,03
                                                          9)
Island of Oahu
Castle Medical Center\c          25.85  43,422,02  2,218,411
                                                6
Kahuku Hospital\b                29.72  3,461,775    169,581
Kaiser Foundation                 1.03         \e         \e
 Hospital-Hawaii\b
Kapiolani Medical Center         34.64  113,234,9  16,491,90
 for Women and Children\b                      52          7
Kuakini Medical Center\b          4.69  88,902,88  (470,757)
                                                1
Pali Momi Medical Center\b       10.52  30,403,93  (6,601,19
                                                5         3)
The Queens Medical               17.58  222,629,4  14,482,04
 Center\b                                      88          4
Rehabilitation Hospital of       11.14  19,582,07    908,242
 the Pacific\b                                  2
St. Francis Medical              11.29         \e         \e
 Center\c
St. Francis Medical              24.67  24,121,08  (3,355,21
 Center-West\c                                  3         2)
Straub Clinic and                 6.28  153,466,5  (5,495,74
 Hospital\d                                    73         8)
Wahiawa General Hospital\b       13.88  23,903,72  (961,100)
                                                3
------------------------------------------------------------
\a State hospital. 

\b Nonprofit hospital. 

\c Church hospital. 

\d Proprietary hospital. 

\e Not available. 



                          Table V.2
           
             DSH Payments (Fiscal Years 1991 and
                            1992)

                                                     Percent
Hospital location and name     1991 DSH   1992 DSH    change
----------------------------  ---------  ---------  --------
Island of Hawaii
Hilo Hospital\a                $371,654  $3,544,53       854
                                                 5
Honokaa Hospital\a              152,233    527,270       246
Kau Hospital\a                   68,845    420,949       511
Kohala Hospital\a               145,649    757,654       420
Kona Hospital\a               1,180,328  4,934,850       318
Island of Kauai
Kauai Veterans Memorial         768,176  3,440,496       348
 Hospital\a
Samuel Mahelona Memorial        255,733  1,438,853       463
 Hospital\a
Wilcox Memorial Hospital\b      138,575    386,021       179
Island of Lanai
Lanai Community Hospital\a       61,897    334,264       440
Island of Maui
Maui Memorial Hospital\a        422,153  7,105,387     1,583
Island of Molokai
Molokai General Hospital\b        1,275      9,500       645
Island of Oahu
Castle Medical Center\c         473,462  1,832,887       287
Kahuku Hospital\b               498,406    515,604         3
Kaiser Foundation Hospital-      20,849    276,420     1,226
 Hawaii\b
Kapiolani Medical Center for    106,003  1,293,745     1,120
 Women and Children\b
Kuakini Medical Center\b        162,955    585,584       259
Pali Momi Medical Center\b      104,182    509,901       389
The Queens Medical Center\b   2,238,280  8,676,643       288
Rehabilitation Hospital of      119,999    883,493       636
 the Pacific\b
St. Francis Medical Center\c    301,193  1,336,270       344
St. Francis Medical Center-     272,182    575,471       111
 West\c
Straub Clinic and Hospital\d    105,404    668,346       534
Wahiawa General Hospital\b       28,064    299,991       969
------------------------------------------------------------
\a State hospital. 

\b Nonprofit hospital. 

\c Church hospital. 

\d Proprietary hospital. 


--------------------
\1 Omnibus Budget Reconciliation Act of 1981, Public Law 97-35. 

\2 Criteria established by State of Hawaii to qualify hospitals as
disproportionate share facilities read as follows:
A.  Either--
(1) Has at least two obstetricians with staff privileges at the
facility who have agreed to provide obstetric services to individuals
who are eligible for assistance under the Medicaid program; or
(2) Did not offer non-emergency obstetric services as of December 22,
1987; and
B.  Either--
(1) Has indigent inpatient days equal to or greater than 15 percent
of total acute inpatient days; or
(2) Has a Medicaid inpatient utilization rate equal to or greater
than one standard deviation above the statewide mean Medicaid
inpatient utilization rate; or
(3) Has a low income utilization rate equal to or greater than 25
percent; or
(4) Is a hospital that derives more than $100,000 of revenue from
public funds paid for care of low-income patients (including state
general assistance and state cash subsidies but excluding Medicare
and Title XIX, Medicaid funds). 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI

HEALTH, EDUCATION, AND HUMAN
SERVICES DIVISION,
WASHINGTON, D.C. 

Sarah F.  Jaggar, Director, Health Financing and Policy Issues,
 (202) 512-7119
Bruce D.  Layton, Assistant Director
Helene F.  Toiv, Assignment Manager
Frederick K.  Caison, Senior Evaluator
Michael F.  Gutowski, Adviser

FAR EAST OFFICE

Patricia K.  Yamane, Evaluator-in-Charge
Mark D.  Ulanowicz, Evaluator



RELATED GAO PRODUCTS
=========================================================== Appendix 0

Health Care:  Rochester's Community Approach Yields Better Access,
Lower Costs (GAO/HRD-93-44, Jan.  29, 1993). 

Employer-Based Health Insurance:  High Costs, Wide Variation Threaten
System (GAO/HRD-92-125, Sept.  22, 1992). 

State Health Care Reform:  Federal Requirements Influence State
Reforms (GAO/T-HRD-92-55, Sept.  9, 1992). 

Access to Health Care:  States Respond to Growing Crisis
(GAO/HRD-92-70, June 16, 1992). 

Access to Health Care:  State Efforts to Assist Small Businesses
(GAO/HRD-92-90, May 14, 1992). 

Health Care:  Problems and Potential Lessons for Reform
(GAO/T-HRD-92-23, Mar.  27, 1992). 

Health Care Spending:  Nonpolicy Factors Account for Most State
Differences (GAO/HRD-92-36, Feb.  13, 1992). 
