High Medicaid Claims Denial Affecting Doc Participation: Study

Ken Terry

July 19, 2021

Medicaid claims are denied at higher rates than are claims with Medicare and commecial insurance plans, and costs for collecting claims are higher with Medicaid than with Medicare and commercial insurance, a new study shows.

As a result, doctors in states where these barriers lead to lower Medicaid reimbursements are less likely to accept Medicaid patients than are physicians in states where they can earn more than is earned from the health insurance program for the poor, the study finds.

The working paper was written by researchers from the University of Chicago Harris School of Public Policy, Columbia University, the National Bureau of Economic Research, the Bureau of Economic Analysis, and the Federal Reserve Bank of San Francisco.

The researchers analyzed data on claims denials and computed billing costs for all types of insurance for about 90 million patient visits from 2013–2015. They found that payment was denied for 25% of Medicaid claims for at least one service after the initial claims submission. Claims denials were much less frequent for Medicare (7.3%) and for commercial insurance (4.8%).

Practices may or may not dispute the claims denials, the authors note. If they don't, they lose revenue; if they appeal the denials and are paid later, they incur extra billing costs. The researchers called the sum of these two amounts the cost of incomplete payment (CIP).

According to the study, CIP averages 17.4% of the contractual value of a typical visit for Medicaid, 5% for Medicare, and 2.8% for commercial insurance. These are significant losses, especially for Medicaid, which pays less than other types of coverage, the authors note.

The study also shows how much less revenue physicians net from Medicaid than from other types of insurance. The average claim amount for all payers was $154, but it was only $98 for Medicaid. The total revenue collected per Medicaid claim was $84, vs $131 for Medicare and $175 for commercial insurance.

Effect on Medicaid Participation

On the basis of data from 2009–2015, the researchers found that physicians reported accepting Medicaid patients 72% of the time, on average, and that they accepted Medicare patients 84% of the time.

The Medscape Physician Compensation Report 2021 found that physicians remain committed to the programs. Of more than 17,000 physicians, 75% will continue taking both Medicare and Medicaid patients, the report found.

The researchers theorized that higher CIP should reduce physicians' incentive to treat Medicaid patients. They tested this theory in two ways: they studied physicians who moved from one state to another with a different CIP, and they examined physicians in the same group who practiced in different states.

On the basis of these comparisons, they estimated that a CIP increase of 10 percentage points reduces physicians' probability of accepting Medicaid patients by 1 percentage point if they move from one state to another. The long-term relationship between a 10-point CIP difference within groups that span multiple states reduces the probability of physicians in the state with the higher CIP accepting Medicaid patients by 2 percentage points, the authors say.

Previous research has shown the effect of Medicaid payment rates on physicians' willingness to accept Medicaid, the authors note. "This study shows that administrative issues are just as important," they say. They point out that other administrative challenges besides rebilling denied claims, such as preauthorization requirements, might also play a role.

Rachel Garfield, PhD, vice president and co-director of the Program on Medicaid and the Uninsured for the Kaiser Family Foundation, said this is not the first study to show the impact of administrative costs on Medicaid participation. "As the study cited, there was research many years ago showing that billing delays in Medicaid were associated with participation in the program."

She agreed with the conclusion of the new study that administrative barriers are as important as the payment rate in the decision of doctors to take Medicaid patients or not.

Medicaid Quality "Really Comparable" to Private Insurance

She did not agree, however, that Medicaid coverage is of lower quality than other kinds of coverage. "Access to Medicaid for certain populations and certain services is really comparable to private insurance ― for example, when you look at the share of kids who are getting well visits or of adults who are getting dental care and so forth," she said.

Where access problems exist, she added, they may be limited to certain kinds of specialty care or specialists in general, or they may be localized. For example, residents of low-income areas may have difficulty traveling to medical offices. "So it's not just about the participation rate for providers nationally but whether there are providers in your neighborhood who take Medicaid," she said.

The study didn't provide enough data, Garfield said, to explain the reasons for Medicaid claim denials. Denials because of patients' lack of eligibility were higher for Medicaid than for other payers, which could be part of the explanation, she added.

The study does not allow a comparison of claims denials by traditional Medicaid programs with denials by Medicaid managed care plans, she said. But it's unlikely that the managed care plans rejected a higher percentage of claims or that they paid rock-bottom rates.

"Certainly, in managed care plans, there's an incentive to manage care efficiently, but it's not open-ended in terms of what plans can do to capture a profit. The rates have to be approved, and there are requirements on how those rates are set, and they have to be realistic so people can access services," she said.

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