Financing rural health and medical services

The provision and utilization of health care services in rural areas are tied directly to the structure of financing. The model of rural health care shaped by federal policies over three decades was significantly altered by changes during the 1980s. With reactions of third-party payers to health care costs rising faster than inflation, the difficulty of accommodating access to care and cost efficiency in provision became evident. This review begins with the literature on patient services and capital financing of rural hospitals, then continues with the financing of clinics, community centers, and other supply forms. Research during the 1980s provides insight into the effects of various financing policies on the supply of services. The demand for health care in rural areas is characterized by less generous third-party coverage, leaving residents paying a larger share of their incomes for care than do urban residents. As a consequence, access to care is especially difficult for low-income and elderly people, heavily dependent upon government financing. Third-party payers have severely reduced cost shifting as a mechanism for taking care of the health care needs of a sizable share of the population, thereby placing providers in an uncomfortable position. Several potential and more formalized financing options for replacing cost shifting are discussed. Several important changes will take place with rural-focused legislation enacted in the late 1980s. These are used to present a rural financing research agenda for the 1990s.