The Medicaid clawback

MPT Contributor Avik Roy published an article on his Forbes blog yesterday that takes up an interesting question that has largely been left out of the national debate surrounding Obamacare--what will the law's proposed Medicaid expansion mean for doctors treating Medicaid patients?

This question deserves more attention than it receives, as Medicaid's chronic underpayment of physicians doesn't just hurt doctors. It also severely undermines the health outcomes of patients who rely on Medicaid for access to health care. Nobody can deny that Medicaid fails to adequately pay doctors for their services: in 2008, the CMS reported that Medicaid reimbursed doctors at just 58% of what they would normally receive from private insurance for comparable services. As a result, nearly one-third of American doctors do not accept Medicaid patients at all, leading to delayed access to care and significantly worse health outcomes for many complex chronic diseases like cancer or cardiovascular disease.

Still, Medicaid is an incredibly expensive proposition for many states, even with the federal government (on average) picking up close to two-thirds of the program's cost (57 percent). States that have rapidly expanded Medicaid coverage and services generally have few tools with which to restrain spending - except for squeezing payment rates to doctors.

And this is exactly what they have done. Roy's article compares states that have stringent eligibility requirements for Medicaid to states that offer Medicaid to their citizens more liberally. The results are ironic, but predictable:

"What's notable is that, of the ten Medicaid states (including D.C.) that pay doctors the least, relative to private insurers, nine are reliably blue: New York (29 percent), Rhode Island (29%), New Jersey (32%), California (38%), D.C. (38%), Maine (42%), Florida (44%), Illinois (46%), Minnesota (46%), and Michigan (47%).

By contrast, of the ten states that pay doctors the most, nine usually vote red: Alaska (113%), Wyoming (94%), Idaho (82%), North Dakota (81%), Delaware (80%), Oklahoma (80%), New Mexico (79%), Arizona (78%), Montana (77%), and North Carolina (76%).

The point of this analysis isn't partisan. Some blue states, like Delaware, pay doctors reasonably well, and some red states, like Texas, don't. But there is a rough correlation of states with extensive Medicaid programs to those with poor physician reimbursement."

The upshot here is that there is no free lunch. Generous Medicaid coverage is a way of claiming political credit for expanding Medicaid access. Stingy physician reimbursements are a subtle way of controlling spending on low-income populations that voters (most of whom aren't on Medicaid) are unaware of. But low reimbursements have real (and negative) health consequences.

As Roy notes, Obamacare temporarily bumps Medicaid reimbursement rates to Medicare levels (roughly 80% of private insurance), but that bump only lasts for two years. What happens beyond that is far from certain, but given the dire fiscal straits of the federal government, it's fair to expect that states will be left holding the bag one way or another.

If Medicaid's reimbursement rates hold to trend - and Obamacare is fully implemented in 2014 - we can expect even more access problems to crop up in states that embrace Obamacare's Medicaid expansion, especially after the federal increase ends in two years. The tragic result will be that an increasingly large share of doctors will either cap the number of Medicaid patients they see or will refuse to accept Medicaid patients altogether, making it even harder for the poor to find adequate health care.

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