The Costs of AIDS

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The California Department of Health Services has produced a new standard-setting study of the costs of care for those infected with acquired immune deficiency syndrome--AIDS. It is an impressive contribution to the world response to the disease.

In essence the report confirms what has been increasingly apparent--that San Francisco has the best program and, at the same time, the most cost-effective program. The strength of the San Francisco program lies in the community-based alternatives to in-hospital care and in a massive corps of volunteers who enrich the program.

The study is limited to patients covered by Medi-Cal, California’s version of Medicaid--the joint federal-state health-insurance program for low-income persons. It was the availability of long-term records of Medi-Cal patients that made possible this study, which is unique in the world.


The California report is reassuring on one score: The cost of AIDS is not going to bankrupt the health-care system. It can strain the system, as is already evident in the hospitals of New York City. This year in California, for example, Medi-Cal is spending $42 million on AIDS--an enormous amount, but small in comparison with the $6.5-billion total Medi-Cal budget.

There is a problem in focusing on Medi-Cal, because it understates the real costs of health care. In AIDS cases, for example, Medi-Cal pays only about 56% of the actual cost, down in three years from 66%. That forces a heavy burden of uncompensated costs onto hospitals, doctors and other providers. Nevertheless, there is general agreement that the annual care cost for AIDS patients in California is about $35,000--a cost that is declining as ways are found to reduce the time spent in hospitals and to reinforce alternatives, including home care, long-term-care facilities and residential hospices. The average annual length ofhospital stays has been cut significantly in the last two years--from 11 to 9.5 days in San Francisco, from 15.19 to 13.3 days in Los Angeles County.

The report poses some serious challenges to public-health officials.

In Los Angeles County there is an urgent need to explain the differentials with San Francisco that result in longer hospital stays and Medi-Cal costs almost twice as high. Those differentials inevitably fuel the charges of critics that the county is moving too slowly in implementing the alternative care programs that it has promised. But the report has a message for all counties--not just Los Angeles, with the highest caseload in the state, and San Francisco, with the second-highest. The highest rate of growth of new cases will be in the other counties, according to Dr. Ken Kizer, director of the state Department of Health Services, leading him to warn: “This is a statewide issue. Over time, there is no community in California that will not be touched by AIDS in a very personal way.”

The Medicaid-based study comes at a useful time in the development of national policy as the share of AIDS cases covered by Medicaid increases. In California, about one-third of the cases are under Medi-Cal, but in some Eastern states Medicaid covers 60% or more.

In welcoming the contribution of this important study, there is a nagging question about an evident gap between the people constructing public-health policy in California and the people putting together the state budget. Even as the Medi-Cal study demonstrates the increasing burdens that lie ahead, a state AIDS budget has been proposed for next year that includes a cut of $13 million in state money. Only an increase of $17 million in federal funds permits a 4% increase in overall spending. That is not an adequate response to the problem that is so well identified in the Medi-Cal study.