Will Healthcare Reform Increase Medicaid Pay as Well as Enrollment?

March 17, 2010

March 23, 2010 — Editor's note: A bill passed by the House on March 21 and now before the Senate would amend the healthcare reform legislation signed into law today by President Barack Obama by increasing Medicaid reimbursement rates to Medicare levels in 2013 and 2014 for family physicians, general internists, and pediatricians at a cost of $8.3 billion. The raise applies to evaluation and management services as well as immunization administration.

March 17, 2010 — It's an underfunded public healthcare program with burgeoning enrollment, yet fewer and fewer physicians are willing to see its patients, mostly because of reimbursement rates that are seen as a joke.

This formula for a meltdown applies to not only Medicare and its headline-dominating pay problem but also Medicaid. However, the odds of a Medicaid meltdown could lessen depending on what Congress does with healthcare reform in the coming weeks.

Medicaid — the combination federal–state program for the poor and underserved — is the neglected half-sister in the healthcare reform debate.

President Barack Obama wants the House this week to pass Senate-enacted legislation that would cover 15 million additional Americans under Medicaid over 10 years. If the House passes the Senate bill as is, then Democrats anticipate a second vote using budget reconciliation to revise the bill to include key provisions of a reform package approved by the House last year.

One of those House provisions calls for raising Medicaid rates for primary care services — specifically, evaluation and management services, such as office visits — to Medicare levels.

"This is really important," Lori Heim, MD, president of the American Academy of Family Physicians (AAFP) told Medscape Medical News. "You must raise rates so people can find a physician who will take Medicaid. Expanding the program doesn't do you any good if no one will take that insurance."

"Right now, many physicians limit the number of Medicaid patients, because they can't afford to accept more," said pediatrician Anne Francis, MD, from Rochester, New York, who chairs the Private Payer Advocacy Committee for the American Academy of Pediatrics (AAP).

The AAFP and AAP were among a dozen or so medical societies that signed a letter in January to President Obama urging him to support Medicaid–Medicare parity. In March, the president expressed interest in a Medicaid pay raise, provided Congress could pull it off "in a fiscally responsible manner."

As with everything else about healthcare reform, boosting Medicare rates is a matter of affordability. According to the Congressional Budget Office, the Medicaid raise envisioned in the House bill would cost $57 billion — a huge amount that explains why Senate Democrats omitted this provision from their original bill in the first place. Lawmakers are considering ways to pare down this figure, with implications for which patients and physicians would suffer from a cut.

Medicaid Now Pays 72% of Medicare Rates on Average

To be sure, Medicaid has performed surprisingly well in light of its funding challenges, at least according to the Kaiser Family Foundation (KFF). The program "compares favorably with private coverage in connecting low-income children and adults with key primary and preventive care," the organization states on its Web site. Robin Rudowitz, associate director for the KFF's Kaiser Commission on Medicaid and the Uninsured, noted that some access problems experienced by Medicaid patients stem from geographical shortages of physicians affecting all patients.

That said, the trend lines for the program bode ill for the future.

First, consider that Medicaid is rapidly growing apart from healthcare reform, in large measure because layoffs during this economic downturn are turning the privately insured into the publicly insured. Last June, monthly enrollment stood at 46.9 million people nationwide, up nearly 3.3 million, or 7.5%, from 2008, according to the KFF. In 32 states, enrollment rose twice as fast as the previous year.

Meanwhile, Medicaid reimbursement rates are the lowest, equal to 72% of Medicare rates on average in 2008, and 66% in terms of primary care services, according to a study published by Health Affairs in 2009. Medicare, in turn, paid about 12% less than commercial insurers in 2008, reports Ingenix Consulting.

State Medicaid programs are funded with a combination of state and federal dollars. Because each state can be as generous or stingy as it wants with its share, within limits, reimbursement rates vary widely. Those in Wyoming were 143% of Medicare in 2008, whereas those in New Jersey were only 37%, according to the Health Affairs study.

Medicaid rates from 2003 through 2008 rose an average of 15%, trailing inflation. In New York, they remained flat, whereas in California they edged up 2%. Those 2 states accounted for 1 in 4 Medicaid recipients in 2008.

The AAP also tracks Medicaid reimbursement by state, and its findings are just as discouraging. In 2007 to 2008, the state-administered Medicaid program in Maine, for example, paid $28.94 for the bellwether evaluation and management code of 99213 — a midlevel office visit with an established patient, according to the AAP. That is 20 cents more than Maine paid 9 years earlier. The AAP's pay data are incomplete because they cover traditional, state-administered Medicaid programs, as opposed to those operated by private, managed-care companies, which cover the majority of children in Medicaid nationwide. Sometimes managed-care Medicaid programs pay more than the state-administered version, and sometimes they pay less, according to the AAP.

How Medicaid rates have trended in 2009 and 2010 isn't clear. Because state governments have faced staggering budget shortfalls during the economic downturn, Congress included an estimated $87 billion in extra federal contributions to state Medicaid programs in its economic stimulus legislation last year, the American Recovery and Reinvestment Act. Even so, more states reduced provider rates and eliminated or limited benefits in fiscal 2009 and 2010 than in previous years, according to the KFF, adding that provider rates may shrink even more if Congress does not renew the American Recovery and Reinvestment Act Medicaid subsidies, set to expire at the end of this year.

Physicians Bailing Out of Medicaid

Given paltry reimbursement, it is not surprising that physicians are bailing out of Medicaid. The percentage of physicians who accept all new Medicaid patients fell from 51.1% in 1996-1997 to 40.2% in 2008, and the percentage who turn away all new Medicaid patients rose from 19.4% to 28.2%, as reported by the Center for Studying Health System Change.

It is not just low pay that causes physicians to abandon Medicaid, it is also slow pay. On average, it took roughly twice as long for state Medicaid programs to send out a check in 2008 as Medicare and commercial payers, according to an article published last year by the magazine Physicians Practice and based on billing and collection data from Athenahealth, a company offering Internet-based business services to physicians. Furthermore, Medicaid programs deny 3 times as many claims as payers.

I'd be happy to take more Medicaid patients if rates changed.

Organized medicine believes that raising Medicaid rates to Medicare levels for evaluation and management services will entice many physicians to open their practices wider to Medicaid patients — a conclusion supported by an informal scientific survey conducted by Medscape Medical News.

"I'd be happy to take more Medicaid patients if the rates changed," said family physician Adil Jaffer, MD, from Youngstown, Ohio. "Currently, we probably lose money by treating them."

Family physician Adam Miner, MD, from Richardson, Texas, agrees. "I see a limited number of Medicaid patients, but if Medicaid is raised to Medicare, and if Medicare rates aren't cut, I'd see any Medicaid patients who want to be seen."

Several respondents, however, told Medscape Medical News that Medicare rates were not high enough to convert them into Medicaid providers. "Absolutely not. Medicare is our worst payer," said Alan Chapman, office manager of the multispecialty Cornerstone Medical Clinic in Harrison, Arkansas. "Medicaid rates would have to be somewhere on the order of double of what they are now."

Still others expressed reluctance to accept more Medicaid patients, no matter what the reimbursement, saying that these patients tended to be sicker and less compliant. "It's not just the rates," said internist Raja Bhat, MD, from Wilmington, North Carolina.

So What About a Medicaid Pay Hike for Surgical Procedures?

The Congressional Budget Office estimates that it will cost $57 billion to raise Medicaid rates for evaluation and management services to Medicare levels. Capitol Hill observers say Senate Democrats are loathe to spend that much for fear of alienating budget hawks; rather, they're looking for ways to economize. One idea is to give the raise just to pediatricians.

This compromise makes it more economically attractive to treat low-income, underserved children, but it does not adequately address the needs of the 15 million more Americans —most of whom would be adults — that healthcare reform legislation would pull into the Medicaid program, said Dr. Heim of the AAFP.

"Giving the raise for [only] pediatric care is shortsighted," said Dr. Heim. "We're making the case to Congress that it doesn't make sense to set up adult Medicaid recipients so they can't find a physician. If you want to lower healthcare costs, you must get the chronic problems and acute illnesses (of adults) under control."

Other compromises under consideration include raising Medicaid rates for all physicians, but only for outpatient visits, limiting the pay raise to primary care physicians, and raising Medicaid rates to only 90% of Medicare.

However, even if Congress injected all of $57 billion into Medicaid reimbursement, it wouldn't be enough to solve the program's fiscal problems. After all, lawmakers haven't proposed hiking rates for surgical procedures. So, a Medicaid patient who finds a welcoming primary care physician may run out of luck when it comes to a cardiac surgeon who will fix a leaky heart valve.

"We'd say you'll have access problems if you focus just on primary care," said Kristen Hedstrom, assistant director of legislative affairs for the American College of Surgeons. "You can't put all your eggs in one basket."

However, Congress is looking at a shortage of those eggs, otherwise known as dollars. Healthcare reformers will have to decide whose basket will get the scarce eggs.

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