Analysis of the Impact of Medicaid Payment Increase for Primary Care Physicians

Beginning January 1, 2013, sec. 1202 of the Health Care and Education Reconciliation Act (HCERA) (P.L. 111-152) requires state Medicaid programs to pay primary care physicians at least as much as Medicare pays for designated services. The federal government will reimburse states for the entire difference between the rates they paid as of July 1, 2009 and the Medicare rates. Nearly all states will have to increase their payment rates significantly. The Kaiser Family Foundation commissioned the Urban Institute to compare the states’ Medicaid rates for designated primary care services to the Medicare rates, including the adjustments for relative value units, the conversion factor, and geographic location. The study found that on average, the Medicaid rates for primary care services as of July 1, 2012 were about 66 percent of the Medicare rates for the same services.

 There is wide variation among states’ rates for the services. As a percentage of the national average, they range from 58 percent in Rhode Island to 242 percent in Alaska. Several states with large Medicaid populations paid less than 90 percent of the national average.

 More than half the states pay no more than 75 percent of the Medicare rates for the same services. About 40 percent of Medicaid beneficiaries live in states that pay no more than 60 percent of Medicare rates: California, Florida, Michigan, Missouri, New Hampshire, New Jersey, New York, and Rhode Island. Only two states paid average rates that equaled or exceeded the Medicare rates.

 To the extent that states implement the Medicaid expansion, they will have sharp increases in the number of Medicaid beneficiaries seeking services; therefore, the increase is intended to assure that there are enough primary care providers to serve them. States will be required to measure physician participation to determine whether the rate increase brings enough new physicians into the program. CMS will use this information to develop future policy on Medicaid rates. Kaiser noted, however, that doctors often cite “administrative hassle” to explain their refusal to accept new Medicaid patients. Because the increase will be effective only for 2013 and 2014, it is possible that many physicians will choose not to take on the costs of adjusting to Medicaid systems.