Medicaid Pay Raise Expires January 1 in Most States

December 19, 2014

Much to the consternation of organized medicine, a federally funded Medicaid pay raise for primary care physicians will expire at year's end without any Congressional action to extend it into 2015.

However, all is not lost for physicians who saw their Medicaid rates boosted to Medicare levels for evaluation and management services and vaccine administration in 2013 and 2014 as a result of the Affordable Care Act (ACA). Fifteen states will continue paying out the raise — some in full, some in part — using their own funds, according to an annual survey of state Medicaid programs conducted by the Kaiser Family Foundation (KFF) in October (Table 1). Another 23 states and the District of Columbia said they would not preserve the raise, while12 states had not reached a decision.

Medicaid is funded jointly by the federal government and states, but administered by the latter.

Relief on the state level is welcome, but medical societies such as the American College of Physicians (ACP) and the American Academy of Family Physicians (AAFP) also hope that the new 114th Congress — which will be entirely under Republican control — will restore federal funding of the Medicaid raise when it convenes in January.

Lawmakers wrote the two-year Medicaid pay bump into the ACA to encourage more physicians to accept Medicaid patients, who would be increasing in number as eligibility expanded in 2014 under the law. Exercising a right bestowed by the landmark Supreme Court decision on the ACA in 2012, 23 states have opted out of Medicaid expansion, with two of those states — Indiana and Utah — actively reconsidering, according to KFF. However, the Medicaid raise took effect in all 50 states, regardless of whether they expanded their eligibility requirements.

Table 1. States That Plan to Maintain the Medicaid-Medicare Raise in Full or Part Using Their Own Funds

State Participating in Medicaid Expansion?
Alabama No
Alaska No
Colorado Yes
Connecticut Yes
Delaware Yes
Hawaii Yes
Iowa Yes
Maine No
Maryland Yes
Michigan Yes
Mississippi No
Nebraska No
Nevada Yes
New Mexico Yes
South Carolina No

Source: Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation

Historically slim reimbursement in Medicaid has dissuaded many physicians from participating in the program. KFF estimated in 2012 that, as a result of parity with Medicare, Medicaid rates for Evaluation & Management (E/M) services and vaccine administration would increase on average by 73% nationwide and more than double in California, Florida, Michigan, New Jersey, New York, and Rhode Island.

The end of Medicaid-Medicare parity will hit some physicians harder than others, depending on what their particular state Medicaid program paid beforehand. In a recent study, the Urban Institute calculated that primary care doctors will take more than a 50% pay cut in California, Florida, Illinois, New Jersey, New York, Pennsylvania, and Rhode Island. The decrease will average out to be 47% and 31.7% in the states that have decided not to preserve Medicaid-Medicare parity, and those that were undecided, respectively.

The Urban Institute noted that its study does not include fees paid through Medicaid managed-care plans, which cover about three-fourths of recipients. In many states, these plans may pay higher rates for primary care than traditional Medicaid, the Urban Institute said, citing a study by the Government Accountability Office.

"How Can I Make a Business Plan?"

By all accounts, there's no hard data yet on whether the fee bump in 2013 and 2014 brought new physicians into the Medicaid program, or motivated others to add more of these patients to their practice. Having that information might have helped medical societies persuade lawmakers to renew the fee bump in the waning days of the 113th Congress, said AAFP President Robert Wergin, MD, in an interview with Medscape Medical News. An uneven rollout of the Medicaid raise — some states didn't introduce it until mid- to late-2013 — and its relatively short timeframe made it hard to study how patient access might have changed, Dr Wergin said.

Matt Salo, the executive director of the National Association of Medicaid Directors, told Medscape Medical News that, in the absence of any research, he suspects the pay raise rewarded physicians already in the Medicaid program, "but didn't move the needle much on bringing new players into the market." A 2-year raise, Salo said, probably wasn't enough to change very many physicians' business model.

Dr Wergin called the expiration of the raise "disappointing."

"Most of our members say they won't quit seeing their current Medicaid patients," Dr Wergin said, citing conversations with family physicians across the country. "However, my sense is that most physicians won't take new Medicaid patients until this thing gets straightened out."

Medical practices that commit to treating an influx of new Medicaid patients produced by the ACA may need to add resources such as an extra clinician, "but how can I make a business plan if I don't know what I'll be paid?" said Dr Wergin.

The ACP also has examined the possible fallout of the disappearing raise. In April, it surveyed members who signed up to receive the extra money and found that 46% would accept fewer Medicaid patients or drop out of the program entirely if the pay increase expired. Not surprisingly, ACP President David Fleming, MD, said in a recent news release that the return of the old Medicaid rates would have a "devastating impact" on Medicaid patients' access to primary care.

Will Republicans Preserve a Piece of the ACA?

The ACP, AAFP, the American Academy of Pediatrics, and other medical societies have not given up on Medicaid-Medicare parity for primary care. Organized medicine intends to lean on Congress come January to restore it.

Some of the legislative groundwork has already been prepared. Earlier this year, Sen. Sherrod Brown (D-OH) and Sen. Patty Murray (D-WA) introduced a bill authorizing the raise for another two years. Dr Wergin said the extension would give researchers more time to demonstrate any positive effects the pay policy has on access to care.

It's not clear how much bipartisan support the Brown-Murray bill enjoys, or if Congressional Republicans will support any legislation that preserves a provision of the ACA, which they repeatedly have vowed to repeal. Passing such legislation will be tough enough in the flux of the new Congress that assembles in January, with freshmen members getting up to speed on healthcare issues, Republicans taking over committee leadership spots in the Senate, and new agendas competing for attention.

Ray Quintero, vice president of government relations for the American Osteopathic Association (AOA), said that the lame-duck session of Congress after the November 4 election would have been a better time to address the reimbursement issue. "We wouldn't have to deal with it in a retroactive manner," Quintero told Medscape Medical News.

That said, the AOA and other medical societies still intend to lobby for the Medicaid raise as well as permanent repeal of Medicare's sustainable growth rate formula for setting physician compensation, another piece of legislation they sought this year.

Said the ACP's Dr Fleming: "The new 114th Congress can, and must, do better."


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