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Growing competition in health care markets and Medicaid managed care, combined with cuts in government funds that subsidize care to the uninsured, are challenging the viability of the safety net. In response to these pressures, "safety-net" providers in fifteen communities are integrating vertically and horizontally, contracting with or forming managed care plans, and seeking to attract paying patients. Such strategies appear to be successful for community-based primary care clinics, but other providers--including hospitals that cannot quickly develop primary care capacity, most local health departments, and providers that fail to attract Medicaid patients--are more vulnerable to health system changes. While the safety net may be intact now, access to care among the uninsured is more at risk in communities without state programs or local taxes that subsidize such care.

With the demise of health care reform at the national level, much of the attention has shifted to state-level efforts. Recently, several states have begun looking to the Medicaid program as a way to solve their health care problems. A principal way in which states are implementing health care reform is through the Section 1115 research and demonstration Medicaid waiver program. The 1115 waiver authority provides states considerable flexibility to restructure their Medicaid programs to offer health care to new populations and thus has great potential for covering large segments of the uninsured population. While it shows great promise, however, there are many obstacles states must overcome both in implementing and in maintaining an 1115 program.

Efforts to control health care costs increasingly rely on purchasers to seek the best value for their investment. In this examination of purchasing strategies in fifteen communities, most purchasers employed traditional strategies to reduce their direct costs, such as shifting costs to employees and switching from indemnity to managed care plans. Fewer purchasers--mostly large companies, public agencies, and coalitions--were using more resource-intensive strategies such as direct contracting with providers or selecting plans based on quality to improve value or efficiency. Although both sets of strategies might help to reduce costs, they are not yet changing the delivery of health care in local communities.

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