Medicaid fees outpace Medicare but still low

Although Medicaid physician fees gained ground on Medicare pay in the past five years, Medicaid pay did not keep pace with general inflation -- much less the increased costs of providing medical care.

Medicaid fees for doctors grew by 15.1% between 2003 and 2008, according to a study by researchers at the Urban Institute, published April 28 in Health Affairs. The calculation is based on fee-for-service rates for primary care, obstetrical care, hospital visits, surgery, radiology and other services.

Primary care fees drove the growth in Medicaid pay. They climbed by 20% on average between 2003 and 2008, the highest of any major category. Pay for all Medicaid services other than primary care grew by only 8.7% during the same period.

Medicaid fees gained ground on Medicare and possibly private health insurance pay as well, the article's authors concluded. Medicaid paid physicians 72% of Medicare rates for the same services in 2008, up from 69% in 2003. Also, Medicare rates remained relatively stable compared with private health plans' fees since 2003, according to the Medicare Payment Advisory Commission.

Prices, however, still grew faster than Medicaid pay. The consumer price index increased by 20.3% between 2003 and 2008, according to the report. The medical care services segment of the index -- which looks at the costs of providing physician services, hospital services and health insurance -- increased by 28.1% for the same period.

"It's a sad fact that Medicaid payments don't come close to covering the cost of caring for the vulnerable patient population that relies on it for coverage," said American Medical Association Board of Trustees Chair Joseph M. Heyman, MD. "The gap between Medicaid and Medicare payments is closing because Medicare payment rates are falling in real-dollar terms, which is alarming as we work to preserve seniors' access to care. We need to ensure that patients who rely on these important programs can get access to needed health care."

States' actions on Medicaid pay during the five-year time period in the study varied widely, with a few states adopting physician pay increases at twice the rate of inflation.

Many states that in 2003 had relatively high Medicaid fees may have limited their increases, the article's authors said. Minnesota had above-average Medicaid pay in 2003 but now falls below the national average. Doctors' fees for the two largest Medicaid programs in the country -- California and New York -- did not keep up with Medicare between 2003 and 2008.

Wyoming ranked first in relative Medicaid physician fees in 2008, the report said. State lawmakers understand the importance of private physician participation in Medicaid and have benefited from budget surpluses, said Dennis Ellis, Wyoming Medical Society's executive director. Still, the state has only a few federally qualified health centers and has a physician shortage.

New Jersey ranked last in relative Medicaid physician pay. The state offered doctors only 37% of Medicare rates in 2008. This is despite the fact that the program has generous benefits and an eligibility level of 250% of the federal poverty level, said Michael T. Kornett, the Medical Society of New Jersey's CEO.

State budget constraints have not allowed Medicaid physician fee increases, said New Jersey Dept. of Human Services spokeswoman Suzanne Esterman.

Unlikely partners

Despite reports of relatively low Medicaid pay and continuing care access problems for enrollees in many states, a growing number of organizations support expanding Medicaid to cover more low-income people.

Families USA and the Pharmaceutical Research and Manufacturers of America in April agreed to support expanding Medicaid eligibility to 133% of poverty, the national eligibility standard for children younger than age 6.

Few state programs today offer any coverage to childless adults, and eligibility for parents averages 67% of poverty, said Ron Pollack, Families USA executive director and president.

Both Sen. Max Baucus (D, Mont.), chair of the Senate Finance Committee, and President Obama support expanding Medicaid.

AMA policy supports increasing Medicaid eligibility to 100% of poverty nationally, with tax credits to help buy insurance for lower-income residents who earn too much to qualify for Medicaid.

But Rep. Michael Burgess, MD (R, Texas), chair of a House Republican health care caucus, said Medicaid should not be considered a model to expand health coverage because it's much less attractive than private insurance. Pollack also acknowledged Medicaid's access problems, saying, "It's clear that the Medicaid safety net for key populations is much more hole than webbing."

Rep. Phil Gingrey, MD (R, Ga.), chair of a physician-driven House Republican health care caucus, said low-income families need more health insurance options but that Medicaid needs to be fixed before it's expanded.

Still, the cost of increasing health coverage to the nation's 46 million uninsured might force Congress to consider expanding Medicaid instead of offering more robust coverage, Dr. Burgess said. "It may be all we can afford."

The print version of this content appeared in the May 11, 2009 issue of American Medical News.

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