HS810 Unit 6 Cost and Equity Appraisal Example

Who Carries the Cost of a Faster Ambulance: A Unit 6 Cost and Equity Appraisal of Four Rural EMS Financing Options

[Student Name]

Purdue University Global

HS810: Advanced Health Policy

Unit 6 Cost and Equity Appraisal

[Instructor Name]

[Date]

The composite state, its counties and every cost estimate are composite; the methods and sources cited are real.

The Options

1. State readiness grants from general revenue.

2. County essential-service designation with a local EMS levy and a state match of 50 percent.

3. Medicaid payment for treatment without transport plus a 25 percent rural rate increase.

4. The status quo.

Consolidation incentives, considered in the alternatives memo, are left out because the committee chair asked for options that keep local services.

Method

Costs are estimated for the state's 38 rural services that remain open, from the state EMS office's cost reports, using one frame: total public cost per year across state, county and federal sources. One-time costs, such as setting up a grant program, are separated from recurring ones. The equity section then asks who pays each dollar and who gains faster response, by county income and by population density. The composite figures are ranges because cost reports are self-reported and incomplete. Policy analysis guidance recommends separating aggregate costs from their distribution, because two options with similar totals can have very different effects on different groups (Bardach & Patashnik, 2020).

Option 1: State Readiness Grants

Cost: about 14 to 18 million dollars a year in state general revenue to bring each rural service to one staffed ambulance around the clock, plus 300,000 dollars to set up the program. Who pays: state taxpayers statewide, through income and sales taxes; urban residents pay most of the cost because they pay most of the taxes. Who gains: residents of rural counties, especially the eight with the longest response times. Equity: progressive across geography, since the tax base of the whole state funds the poorest counties. Risk: grants depend on annual appropriations.

Option 2: County Designation With a 50 Percent Match

Cost: the same 14 to 18 million dollars of readiness spending, split roughly evenly between county levies and the state match. Who pays: rural property owners through county levies of roughly 0.4 to 1.6 mills, highest in the counties with the smallest tax bases and longest distances. Who gains: rural residents, but only in counties that choose to levy. Equity: regressive by geography. The poorest, most sparsely populated counties face the highest rates for the same service, and some may not levy at all, leaving their residents with no gain.

Option 3: Medicaid Treatment Without Transport and Higher Rates

Cost: about 5 to 7 million dollars a year in total Medicaid spending, of which the state pays roughly a third and the federal government two thirds. Who pays: mostly federal taxpayers; the state share falls on general revenue. Who gains: services in counties with many Medicaid patients; services serving mostly older, Medicare-covered residents gain little. Equity: mixed. It helps the poorest counties where Medicaid enrollment is high, but its revenue is too small to fund around-the-clock readiness on its own.

Option 4: Status Quo

Cost: no new public spending, but continued closures. The cost appears as longer response times and the added hospital costs of patients arriving later. Who pays: rural residents who wait longer, most of them older; counties forced to fund emergency replacements when a service closes. Equity: the most regressive, since the burden falls entirely on the people with the least access.

The status quo looks free only because its cost is paid in minutes by rural residents rather than in dollars by taxpayers.

Joining Cost and Equity

Option 1 is the most expensive to the state but the most equitable across geography. Option 2 costs the state half as much but shifts the burden to the counties least able to carry it. Option 3 is the cheapest to the state and draws federal funds, but it cannot by itself fund readiness. A combination of Options 1 and 3, with grants sized to cover the gap that Medicaid payments leave, would cost the state roughly 10 to 14 million dollars a year after federal matching, with the burden spread statewide.

What Would Change the Appraisal

Better cost data could narrow the ranges considerably. If cost reports from the services were audited, the readiness gap might prove smaller than estimated. A change in federal Medicare payment policy for rural ambulance services would also reshape every option, since Medicare covers the largest share of rural transports. Federal auditors found that costs and margins vary greatly by volume (Government Accountability Office [GAO], 2007), so any statewide estimate hides wide variation among services.

Limits

The appraisal uses self-reported costs and does not estimate health benefits in dollars; faster response is treated as the benefit itself. A national review long ago noted how little reliable cost data exist for EMS systems (Institute of Medicine, 2007), and that gap limits every estimate above; the commission proposed in this session would begin to close it.

References

Bardach, E., & Patashnik, E. M. (2020). A practical guide for policy analysis: The eightfold path to more effective problem solving (6th ed.). CQ Press.

Government Accountability Office. (2007). Ambulance providers: Costs and expected Medicare margins vary greatly (GAO-07-383). U.S. Government Accountability Office.

Institute of Medicine. (2007). Emergency medical services: At the crossroads. The National Academies Press.