Temporary Medicaid fee hike could come back to haunt plans

August 1, 2012

PPACA's rate boost only goes so far

Key Points

FEWER PHYSICIANS are willing to accept Medicaid patients today, as the reimbursement rates continue to decline. State and federal policies are attempting to remedy the problem with additional funding, particularly for primary care.

For most states, the rule proposed in the Patient Protection and Affordable Care Act (PPACA), which increases Medicaid rates up to Medicare levels, and the $11 billion in new federal funds to improve Medicaid primary care, were good news.

"That is increasingly difficult to do that with such a difference between Medicare and Medicaid rates," says Johnson.

However, there are long-term implications for any temporary increase in provider fees, he says. It could be difficult for providers and Medicaid managed care plans to return to the lower fees when the short-term program expires. If rates return to past fee levels-which will then be several years out of date-the payment difference could be dramatic. Sharp rate drops could cause a mass exodus of providers and put Medicaid managed care over a barrel.

The scenario plays out year after year in Medicare, in which the intended payment reduction to providers based on the Sustainable Growth Rate is habitually overruled by Congress. Cumulatively, the well-overdue rate reduction has climbed to 30%.

MEDICAID EXPANSION

There is concern that future Medicaid expansion under PPACA will strain existing provider networks. Networks might not be adequate to accommodate primary care much less specialty care needs. The Kaiser Family Foundation estimates Medicaid expansion could bring an additional 17 million individuals to the program by 2016.

A new fee increase can help alleviate the access issue to some extent by potentially attracting new providers to Medicaid plan networks or encouraging contracted to providers to accept more new patients.

It is less clear what will happen to plans' ability to serve new Medicaid beneficiaries if large numbers of providers exit. The segment seems to be fairly attractive to plans looking to expand membbership.

In the 1990s, Medicare providers opted out of the program because of low rates, but were attracted back in when Medicare Advantage was created and rates increased.

For Medicaid enrollees, an abrupt change in physician availability could be problematic; particularly for those who have just gained access to primary care coverage and preventive care for the first time in years. The patients could develop relationships with physicians and get into the habit of seeking care.

However, once the relationship is established, a physician might later decide to stop accepting new patients or stop taking Medicaid all together, says Doug Fenstermaker, managing director and vice president of healthcare at Warbird Consulting Partners in Atlanta.

"That is a problem when taking care of people who are new to the system and just learning how to use primary care rather than relying on the emergency room for care," Fenstermaker says. "That could come to a grinding halt."