Health Care Reform and Immunization: How Policy Initiatives Affect the Financing and Delivery of Vaccines

Consultant for PediatriciansConsultant for Pediatricians Vol 9 No 2
Volume 9
Issue 2

For decades, our country's health care system and its government have struggled with the challenge of providing immunization coverage for all children. Starting with the Section 317 legislation of 1962, numerous policy initiatives have been passed in an effort to ensure that sufficient supplies of vaccines are available, that the cost of vaccines for low–income children is covered-and that these vaccines are actually administered to the children that need them.

ABSTRACT: For decades, our country's health care system and its government have struggled with the challenge of providing immunization coverage for all children. Starting with the Section 317 legislation of 1962, numerous policy initiatives have been passed in an effort to ensure that sufficient supplies of vaccines are available, that the cost of vaccines for low–income children is covered—and that these vaccines are actually administered to the children that need them. Initiatives have included the Vaccine Injury Compensation Program (to help ensure that an adequate number of vaccines are manufactured), the Vaccines For Children program (to provide funding for the vaccination of low–income children), Immunization Information Systems (to eliminate delivery problems caused by poor vaccine record keeping), and others. These policies have had mixed results, but their overall effect has been to improve immunization rates. Nonetheless, further improvement is needed. In particular, there is need for a strategy to cover the increasing cost of immunization, which is rising because of the addition of new and more expensive vaccines to the immunization schedule.

The current health care system is in disarray. The United States now spends more than $2.2 trillion on health care each year; that represents 16% of the gross domestic product (GDP). Health care costs have been rising steadily over the past 20 years. If growth continues at the current rate, by 2017 health care expenditures will represent 20% of the national GDP. Moreover, 46 million Americans are uninsured. Lack of coverage for such a large portion of the population not only means poor health outcomes but also further increases in health care costs.1

One reason for the crisis in health care is that the current system is based on expensive, acute, hospitalbased care. In fact, health care costs may be reduced by promoting wellbeing at home and in the workplace,2 and by ensuring that all Americans have health insurance that provides and emphasizes preventive care.

However, making the changes needed to create truly effective delivery of preventive health care is far from a simple matter. In this article, we examine the case of childhood vaccination— one of the most successful primary prevention methods in all of medicine. We review the policy decisions that have been made over the past 20 years to try to improve levels of vaccination coverage, and we look at the results these decisions have achieved. Finally, we offer suggestions— which we hope might be considered in the current health care debate— for improving the financing, supply, and delivery of vaccines.



Despite the fact that immunization has been cited as one of the top 10 great achievements of health care,3 immunization rates for many vaccine–preventable illnesses are not optimal. In an evaluation of the quality of ambulatory pediatric care between October 1998 and August 2000 in 12 metropolitan areas, Mangione– Smith and colleagues4 found that only 49.8% of children were fully immunized at age 2 years.

Problems with vaccine supplies, cost, physician compensation, and delivery have all contributed to the less than optimal immunization rate. Simply making insurance coverage universal is not likely to solve these problems.



Policy makers have recognized for some time that more comprehensive measures are needed to make effective preventive care and immunization a reality. Over the years, a number of policy changes have been enacted, at least one of the purposes of which was to improve immunization rates. However, while these policy initiatives have had laudable goals and objectives, they have not all had the desired effect.

Section 317 of the Public Health Service Act. It became apparent decades ago that the cost of vaccinating children was a significant barrier to achieving high levels of immunization. Section 317 was the first of many policies intended to help offset the costs of vaccination. Introduced in 1962, this government financing program was designed to help federal and local governments provide vaccines by enabling them to purchase vaccines at a negotiated price and by providing personnel for health departments. The Section 317 program is still in existence.

One of the chief drawbacks to Section 317 is that its budget requires annual congressional approval. Consequently, its budget changes frequently. Also, coverage can be uneven. For example, a recent survey of state immunization programs for underinsured children reported a lack of Section 317 funding for the tetanus–diphtheria–acellular pertussis (TDaP) vaccine and the pneumococcal conjugate vaccine (ie, Section 317 was unable to fund the TDaP vaccine for 81% of underinsured children and unable to fund the pneumococcal conjugate vaccine for 100% of these children).5

Vaccine Injury Compensation Program. The importance of financial support for ongoing immunization programs has long been recognized. However, maintaining a sufficient supply of vaccines is also a key factor in achieving adequate immunization levels. In the early 2000s, there were shortages of 8 of 11 of the vaccines recommended for children, for various reasons.

The National Childhood Vaccine Injury Compensation Act of 1986 created the Vaccine Injury Compensation Program (VICP) in an effort to ensure an adequate vaccine supply and stabilize vaccine costs by creating a more favorable situation for manufacturers. It provided a no–fault option for settling vaccine injury claims and provided compensation to those injured by certain vaccines. People who claimed vaccine injury were thenceforth required to go through VICP rather than pursue lawsuits against pharmaceutical companies or the health care providers who administered the vaccines. It was hoped that this incentive would induce pharmaceutical companies to stay in the vaccine business.

VICP has resulted in an increase in immunization rates, stable vaccine prices, and ongoing developments in vaccine research. Liability issues remain, but they are not resulting in vaccine shortages. As autism litigation has raised doubts about vaccine safety, VICP has striven to address the unease of parents and providers.6

Vaccine replacement systems. An approach designed to increase immunization rates in poor children was instituted in a number of states in the 1980s. Referred to as "vaccine replacement systems" or "partial purchase systems," these programs typically allowed participating clinicians who vaccinated children covered by Medicaid to obtain free vaccines from health departments to replace the doses they had administered to Medicaid recipients. However, a study by Mayer and colleagues7 showed that children who lived in states with vaccine replacement systems were actually less likely to be up–to–date with their immunizations than were children who lived in free market states.

Researchers were increasingly realizing that a broader–based reorganization of health care delivery would be needed to improve immunization rates. In 1994, Lieu and colleagues8 published a cross–sectional study of financial reform and referral patterns at public health clinics. They found that most of the parents with insurance cited the waiting time in public health clinics as a barrier to immunization. The study authors concluded that an organizational reform would be needed to identify and rectify such barriers.

Another 1994 study, this one by Guyer and colleagues,9 looked at vaccine coverage among children from low socioeconomic groups, including children who had satisfactory access to health insurance (such as Medicaid) and whose providers had access to free vaccines. The study showed that establishing a medical home early in a child's life was a key factor in achieving satisfactory vaccine coverage at age 2 years.

Vaccines For Children (VFC) program. This state–implemented federal program for reforming the financing of vaccines was created in 1994 by the Omnibus Budget Reconciliation Act. VFC did much to improve immunization coverage rates among poor children by making it easier to provide immunization in the medical home. The VFC program provides free vaccines through VFC providers to children eligible for Medicaid, uninsured children, American Indian and Alaska Native children, and children whose insurance does not cover immunization. Private physician practices and private clinics, as well as public health clinics, community health clinics, and others are eligible to become VFC providers. Today, most pediatricians in the United States are enrolled in the VFC program.

The VFC program is unique because its budget does not need congressional approval; instead it is approved by the US Department of Health and Human Services. Also, when the Advisory Committee on Immunization Practices (ACIP) recommends a new vaccine, the ACIP is entitled to add the new vaccine to the VFC program.

First Dollar Law. This was another vaccine financing reform that was implemented the same year as VFC—1994. It was first passed in New York State and adopted later in a number of other states. The First Dollar Law requires all insurers (with some exceptions) to cover immunizations and visits for preventive care beginning with the "first dollar," thereby eliminating copayments for vaccinations.

A study by Szilagyi and colleagues10 of the effects that VFC and the First Dollar Law had on where children in New York State were vaccinated found that these reforms resulted in a substantial decrease in the number of physicians who referred patients to health department clinics for vaccinations. The decline involved significant numbers of both children who were VFC–eligible (60%) and those who had health insurance (50%). At the same time that referrals to health department clinics were declining, immunization coverage rates among 2–year–olds increased. This led the study authors to conclude that the vaccine finance reforms were keeping children in their primary care medical homes.

Medicaid managed care. Although the movement to Medicaid managed care that occurred throughout the 1990s may not have been primarily motivated by a desire to improve preventive services such as childhood immunization, some policy experts were hopeful that it might have such an effect. However, research has not demonstrated the hoped–for results. In New Mexico, all Medicaid recipients were enrolled in a managed care organization. A significant decrease in immunization coverage followed (from 80% to 72%). Apparently, the policy change increased workloads and economic strain on safety net institutions, and these, in turn, resulted in the lower immunization rates.11,12

Alessandrini and colleagues13 studied the effects of Medicaid managed care on the quality measure of immunization rates in a prospective cohort of children. They found no difference between those enrolled in Medicaid managed care and those in fee–for–service Medicaid. Of note, this study found that children cared for in private physician offices were less likely than those cared for at hospitalbased or community clinics to be upto– date with immunizations at 24 months; this held true for children in both Medicaid managed care and fee–for–service Medicaid programs.

Immunization Information Systems. In addition to issues involving cost, supply, and locus of delivery, another significant group of barriers to the achievement of robust immunization coverage are those that stem from ineffective recall systems. Kempe and colleagues14 describe 4 such barriers: missing phone numbers, lack of accurate information on vaccine records, missed appointments, and missed opportunities. To address the problem of lack of accurate information on vaccine records, the CDC at the beginning of the 21st century established immunization registries, now known as Immunization Information Systems (IIS). IIS are confidential, computerized information systems that collect and consolidate immunization data from health care providers. They maintain birth–to–death vaccine histories and can exchange information with other health information systems. IIS are capable of producing reminders and recall notifications, as well as handling adverse event reporting.

In addition to helping with the management of vaccine inventories, the identification of new areas of need, and the tracking of histories in usual times, IIS are especially important during disasters. They proved invaluable in the aftermath of hurricane Katrina, helping health care workers to deliver needed vaccinations to children whose personal vaccination records had been lost. As of 2006, 65% of US children were participating in IIS. However, IIS are not fully functioning in all 50 states.15

Continuing efforts to improve vaccine financing. The federal, state, and local governments have continued to make efforts to cover the cost of immunizing poor children. The Children's Health Insurance Program (CHIP), initially passed in 1997 and renewed in February 2009, provides federal funds to help states expand insurance coverage for uninsured low–income children beyond what is provided by Medicaid. Although originally CHIP provided coverage for children with family incomes up to 200% of the federal poverty level, the 2009 reauthorization extended the cut–off to 250% of the federal poverty level; the reauthorization also allowed states to get federal matching funds to cover children from families living on incomes up to 300% of the poverty level. The reauthorization provides insurance coverage for an additional 4 million children.16

Another recent source of federal funds for vaccines is the New Health Care Reform and American Recovery and Reinvestment Act of 2009. The stimulus package designated $1 billion for investment in prevention and wellness services, including $650 million for clinical and community–based preventive services and $300 million for the CDC to provide immunizations for low–income children and adults.

In many areas, state and local initiatives supplement federal monies, providing funding for children's vaccines.

A recent Institute of Medicine report found that current financing mechanisms have succeeded at improving immunization rates; however, the report also found that racial, ethnic, and socioeconomic inequalities still exist and need to be addressed.17 About 14 million children are underinsured, meaning that they either have insurance with no preventive services included or have only catastrophic (high–deductible) insurance. Even with the mix of different federal, state, and local vaccine financing programs currently in place, there are gaps in vaccine availability for underinsured children.


We have achieved great success in vaccine research, manufacturing, and delivery. However, more work is needed to ensure access for every child, regardless of age, sex, socioeconomic status, or geographical location. Whatever version of health care reform is passed, it is important that a strong emphasis be placed on preventive care.

To do this will require strategies that give primacy to primary care and the concept of the medical home. For example, even though pediatricians spend the majority of their time in well care and preventive care, patient education time is not well compensated.18 Incentives might be created to ensure that pediatricians spend sufficient time on preventive care recommendations. Incentives could also be used to promote continuity and coordination of care for chronic illnesses, and appropriate reimbursement could be provided for evaluation and management.

One of the greatest challenges we face is the growing burden from the rising costs of immunization. As newer and more expensive vaccines have been added to the routine immunization schedule, the cost of immunization has increased steadily. The average cost to purchase vaccines for 1 child increased from $10 in 1975 to $385 in 2001; this figure is expected to be $1225 by 2020.19 Before the addition of the pneumococcal conjugate vaccine, VFC funds were estimated at $500 million; however, the projected cost by 2020 is estimated to be $1.5 billion. This increase reflects both the addition of new and more costly vaccines and the fact that VFC vaccine expenditure must be adjusted as the number of uninsured and underinsured changes.

How can these costs be covered? Both federal and state legislatures will need to take into account the rising cost of vaccines when they pass budgets. In addition, a different approach to purchasing and pricing may be needed to keep up with the development of new vaccines. To ensure that the vaccine supply remains adequate, reforms need to increase funds for the stockpiling of routine vaccines, support vaccine research, mandate that all insurance providers cover immunization as part of preventive care, and include measures that will help change the public's view of vaccines.




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