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Medicaid Needs to Pay Doctors More

Medicaid Needs to Pay Doctors More
By Aditya Singh • Issue #12 • View online
Medicaid is a federal and state program to cover Americans with lower income levels. Administered at the state level with federal funding to support its operations, Medicaid plans offer millions of Americans the opportunity to afford healthcare in situations that employers do not provide health coverage and wherein private insurance is excessively expensive.
However, the Medicaid program pays care providers less than many other private insurance plans and Medicare, and this may mean less access to care for Medicaid members. This week, let’s look into why that is.

What is Reimbursement
Health insurance generally has three important stakeholders. There’s the member of the health plan, who is also a patient to a care provider. The health insurer is the other large stakeholder.
Without insurance, the cost of the services of the doctor may be too much for the patient to reasonably be expected to pay out-of-pocket. At the end of the day, care providers need to afford the upkeep of their medical equipment, offset the cost of education and training, and generally get some payment for the value they provide in the form of treating a patient.
Health insurers are commonly called payers in the industry, because their role is to help the patient pay the care provider.
In exchange for offering a patient certain medical services, a care provider needs to be reimbursed by the payer, or paid to cover the whole treatment, or whatever is left over after the patient pays a certain amount out-of-pocket.
This reimbursement process is why billing is so important in the care provider’s day-to-day operations. If they don’t bill the health insurer for medical services, they can’t be reimbursed by the payer and get revenue they’re otherwise entitled to.
One last major point before we dive into the specifics of Medicaid’s reimbursement rates is that the amount a provider can expect in reimbursements is different between different payers. Typically, the provider and payer settle on a negotiated rate or allowable cost. This is the amount that the provider can expect to get in revenue from a patient under a certain health insurance plan.
The Spread in Reimbursement Rates
Reimbursement rates are generally not easy to access. Some agreements may be confidential, and attempts to open up these rates such as through the Hospital Price Transparency Rule and Health Plan Price Transparency Rule have had mixed results with making such data easy to access.
However, we do know that private insurers tend to pay significantly more than Medicare. Statistically, Medicaid sets even lower reimbursement rates than Medicare.
Seniors over the age of 65 are eligible to be under Medicare. Even though the Medicare program pays less than much private insurance, the sheer number of people on Medicare throughout the country means that most care providers accept Medicare coverage. It becomes a situation that the volume of patients offsets the lower profit margin per patient.
A value of 1 indicates that Medicaid pays the same as Medicare for physician services. Lower values mean even lower reimbursement rates.
A value of 1 indicates that Medicaid pays the same as Medicare for physician services. Lower values mean even lower reimbursement rates.
The Medicaid program across many states pays notably less than Medicare, in many cases paying less than three-quarters of what Medicare would pay. A 2013 federal mandate requiring Medicaid rates for some primary care services to match Medicare rates helped this issue to some extent, but the difference is still notable in many other healthcare services.
For example, in 2020 hospitals received only 88 cents for every dollar spent caring for Medicaid patients. This amounted to a $24.8 billion underpayment.
The numbers add up to the point that many healthcare providers have had to opt out of treating Medicaid patients, because it simply costs too much to treat these patients.
Remember the 2013 mandate above? Research on data following the mandate found that increases in the Medicaid reimbursement rate resulted in less Medicaid members reporting difficulty finding a care provider.
What the Data Doesn't Show
The long-term chain reactions of Medicaid’s lower reimbursement rates are harder to quantify with data, but the obstacles it presents to patients on Medicaid are drastic.
Remember, Medicaid covers low-income Americans who are disproportionately likely to face issues like housing and food insecurity, which already make it difficult to prioritize healthcare. The cost of transportation, time off work, and childcare during healthcare visits make trips to the doctor expensive for many of these people.
The lower reimbursement rates also take a toll on patient experience. Losing money on a patient with Medicaid gives the care provider a dangerous incentive to keep the visit as fast as possible. Consider the following quote from a patient with Medicaid:
I just know a lot of doctors on Medicaid, they know you’re on Medicaid and it’s like, well, you guys are lucky we’re even taking this. They’re just not as gentle with you. They’re really short and they come in for five minutes to see you and have you waiting for an hour or even more.
Even if the doctor doesn’t mean to cause harm down the road, the poorer incentives to build a relationship with the patient means that the quality of care is worse for the patient, leaving room for worse long-term planning, less use of preventative services, and higher probabilities of serious complications down the road.
These lower reimbursements simply do not do enough to support Americans who need more support from the healthcare system given the socioeconomic challenges that poverty presents.
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Aditya Singh

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