If Medicaid Reimbursement Rates Fall And No One Blinks…

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On Monday I hunt-and-pecked my way (re; see this) into some punditry about why the temporary pay-bump contained in the Affordable Care Act for providers treating Medicaid patients ended on New Years Day with a whimper and not a bang. For posterity’s sake I thought I’d reproduce that here with some extra commentary, but you’re definitely welcome to read the short version.

The 2010 health care law required that Medicaid providers be reimbursed at the same rate as Medicaid, which was a significant increase (around 11 billion dollars in total). The sunset of that provision will result in an average ~43 percent decrease. Some states are stepping in to maintain those rates, but many others are not — including those that are also expanding the program. Thus you’ll read around health policy circles concerns or interest on the perennial question of provider acceptance rates of Medicaid enrollees. The implication, obviously, is that lapse of two year pay increase might exacerbate the (actually not straightforward) issue of access to care.

All of this prompts Christopher Flavelle over at Bloomberg View to note that, even with the higher rates, Medicaid is already exceedingly cheap — on a per-capita basis the program spends far less than average U.S. spending on health care (he also provides this in the ever-handy chart form). Flavelle proffers two explanations:

The optimistic interpretation is that Medicaid is a tremendously efficient program. The pessimistic one is that state administrators of Medicaid are pushing payments to unrealistically low levels.

The second interpretation is probably closer to the truth. And at some point, conservative warnings about the dysfunctions of Medicaid will become self-fulfilling: Providers will stop participating, pushed out by spending restraint that no other health-insurance program would dare match.

Now it’s entirely possible that both of these could be true at the same time. (Medicaid covers a lot of children, spending much less than the other categories of enrollees, yet pediatricians were still accepting new patients at an 80 percent rate in ’08. That strikes me as pretty efficient). But I agree that the second is more relevant to the comparative silence this week, as unlike the routine SGR battles in Congress (the effort to ‘fix’ the Sustainable Growth Rate formula that dictates Medicare spending), which keeps raising physician reimbursements, there was no concentrated effort to maintain the Medicaid rates to match.

I can think of a few explanations. One big reason that you didn’t see any institutional protest, related to Flavelle’s pessimistic interpretation, is because states are responsible for a big chunk of Medicaid costs, and those represent a huge budgetary commitment. Health care is expensive and Medicaid enrolls around 24 million more people than Medicare (more than 68 million in all). Thus it’s pretty easy to view those “state administrators of Medicaid” having a strong incentive to not blink when reimbursement rates plummet.

However, the most important aspect of this would be power, or in-particular the lack thereof. The political dynamics that make Medicare something of a ‘third rail’ simply don’t exist when it comes to Medicaid. There’s no significant national lobbying muscle behind a pro-Medicaid agenda to the benefit of providers and beneficiaries, which is why you didn’t see the AMA knocking down the doors of Congress to protect physician pay for treating Medicaid patients. And there certainly aren’t massive political PACs lobbying on the behalf of poor children, the elderly, and disabled. Moreover, as a class, Medicaid beneficiaries, unlike their Medicare counterparts, aren’t politically active and don’t vote with enough numbers to have their best-interests taken seriously.

And this isn’t even including some of the basic demographic obstacles. Children make up the single largest Medicaid enrollment group, but kids don’t vote and they plainly don’t write cute “Don’t Discourage Doctors From Seeing Me With Unrealistically Low Provider Reimbursement Rate” letters (though they obviously should, right?). The largest spending category for the program are the disabled (42%), followed by poor elderly (21%) and then those poor non-writing children (21%).

Which is all a long-winded way of saying that the temporary pay increase for providers was aimed towards the most vulnerable, least politically powerful, groups in society. So when the the funding mechanism that attempted to facilitate their new-found health care security collapses without so much as a sneeze from the polity, well, exactly no one should surprised. Barring the type of leftward-leaning government that miraculously passed the ACA in the first place, the precariat simply aren’t a priority.


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