California Physicians Decry 10% Medicaid Pay Cut

October 28, 2011

October 28, 2011 — The California Medical Association (CMA) will go to court again to block the latest cut to already stingy Medicaid reimbursement rates in that state, a CMA leader said today.

The association contends that the 10% reduction in provider reimbursement will drive more physicians out of the program and make it harder for the poor to receive medical care, violating federal requirements that govern the Medicaid program.

"When regulators don't follow their own rules, legal action is our only recourse," CMA Vice Speaker Ted Mazer, MD, told Medscape Medical News. "They've just destroyed the program."

The CMA and other California healthcare organizations, along with Medicaid beneficiaries, obtained a court injunction to stop a previous 10% pay cut set for fiscal 2008. That legal battle escalated to the US Supreme Court, which recently heard oral arguments on whether providers and beneficiaries have any standing to bring a lawsuit to enforce federal Medicaid regulations.

On Thursday, the Centers for Medicare and Medicaid Services (CMS) approved a request by Medi-Cal, the Medicaid program in California, to reduce reimbursement rates for physicians, dentists, nursing homes, and other providers by 10% in fiscal 2012, which began on July 1, 2011. Exempt from the rate cut are services for children.

California is 1 of 14 states cutting physician reimbursement in the current fiscal year to make ends meet as they cope with higher Medicaid enrollment, declining tax revenues, and the loss of federal stimulus funds, according to a survey released this week by the Kaiser Family Foundation.

Dr. Mazer, an otolaryngologist in San Diego, says the Medicaid program requires that state programs set provider rates high enough so that beneficiaries enjoy roughly the same access to care as others in their community.

"We haven't had that in the 25 years I've been practicing here," said Dr. Mazer, who stopped treating Medi-Cal patients 18 months ago because of paltry rates. "That's what we sued over."

Medi-Cal, he says, currently pays $24 for a midlevel office visit with an established patient, tagged with the familiar billing code of 99213. That compares with $68 to $75 from private insurers and $71 from Medicare, he said.

A 10% cut would lower Medi-Cal reimbursement for a 99213 office visit to $21.60. The amount will go down even more if CMS approves Medi-Cal's request to charge beneficiaries a $5 co-pay, which is included in the fee.

"That will never get collected," Dr. Mazer said.

"A World of Hurt in This Decision"

Because current Medi-Cal rates are so low, only 50% of California physicians participate in the program, according to the CMA. As a result, 56% of beneficiaries report difficulty in finding a physician. Often, they go without care until they land in a hospital emergency department.

Dr. Mazer and others say the 10% reduction set for this year will only worsen the access problem.

The California Department of Health Care Services, which administers Medi-Cal, said in a press release yesterday that CMS had concluded the cuts would not jeopardize patients' access to care. Furthermore, it stated, the federal government had blessed the state's plan to monitor the availability of care for Medi-Cal beneficiaries on an ongoing basis.

Dr. Mazer said he is not persuaded by these reassurances. California, he said, has refused to share the data that convinced CMS to deem the pay cut as nonharmful, and the state is just as secretive about the monitoring plan, developed without CMA input.

The CMA has repeatedly argued that by approving the reduction in Medi-Cal rates, the Obama administration is undermining its own Affordable Care Act, which will add 3 million individuals to the state program beginning in 2014 as a result of expanded Medicaid eligibility.

"On one hand, [the administration] is trying to create the infrastructure for healthcare reform where they put at least a third of the newly insured into Medicaid, and at the same time the administration is gutting the Medicaid program in California," said Dr. Mazer. "CMS has set a precedent — balance your budget on the backs of the poor. I'm sure other states will follow suit."

Carol Havens, MD, the president of the California chapter of the American Academy of Family Physicians, agrees with Dr. Mazer about the effects of the rate cut on healthcare reform.

"Having insurance means nothing if you don't have access to care," Dr. Havens told Medscape Medical News. "I see a world of hurt in this decision."

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