End of Medicaid parity will be costly to PCPs

Medicaid reimbursements to primary care physicians (PCPs) are expected to drop by 50% in many states, though the exact loss depends on whether individual states have decided to continue to fund an expiring federal program.

ALSO READ: Will Medicaid parity be extended?

Without an act of Congress, Medicaid parity will expire on December 31, 2014. A report by the Urban Institute estimates the end of the fee increase could cost primary care physicians nearly 50% of their Medicaid reimbursement payments.

More than 7.5 million Medicaid enrollees were added across 27 states and Washington D.C., following the implementation of the Affordable Care Act (ACA). In an effort to facilitate physician acceptance of this influx of patients, the federal government fully funded a two-year pay raise for primary care physicians.

As of June 2014, the Urban Institute estimated that the federal government spent about $5.6 billion on the fee increase since its implementation in January 2013.

Fifteen states have pledged to continue the Medicaid pay increase using state funds, but 24 states indicated they would not and 12 were still undecided as of fall 2014.

On average, there will be a 42.8% reduction in primary care service fees across 49 states and Washington D.C., according to the Urban Institute. In states that don’t plan to continue the increase with state funds, primary care fees could drop by 47.4%. States that will continue to fund the increase will save physicians from an estimated 31% reimbursement drop.

Next: States hit the hardest by the end of Medicaid parity

The largest decrease in PCP fees is expected in Rhode Island (67.3%), which has decided not to continue the pay increase through state funds.

Nearly 72% of Medicaid enrollees reside in the states that do not plan to continue to fund the increase, while the states that will continue the increase cover only 15.6% of total Medicaid enrollees. The Urban Institute also reports that in seven of the states (Rhode Island, California, New Jersey, Florida, Pennsylvania and Illinois) that won’t continue the increase, PCPs could face losses for certain codes of 50% or more. While Michigan doesn’t plan to continue its increase-which would result in more than a 50% fee drop-that state does plan to soften the blow by preserving half of the fee bump through state funds.

The Urban Institute reports that the decision to extend the fee increase has little relationship to state decisions to participate in Medicaid expansion programs. Among the 27 states that have expanded their Medicaid programs, along with Washington D.C., nine states plan to continue the fee increase using state funds, compared with six of the states that have not expanded Medicaid, according to the report. The study also indicates that primary care fees would fall more in Medicaid expansion states than in non-expansion states in 2014 if all states allowed the fee increase to expire.

The study did not include fees paid through Medicaid managed care, which covered roughly 74.2% of Medicaid enrollees and pays higher rates for primary care than fee-for-service Medicaid.

The Urban Institute cautions that fee decreases following the end of federal funding could result in Medicaid patients not being able to find a physician, since previous studies have demonstrated a correlation between low payment rates and fewer physicians accepting Medicaid patients.

Four states that do not plan to continue funding the increase-California, Illinois, New York, Ohio-are expected to be hit the hardest, according to the Urban Institute, with significant Medicaid enrollment expansion coupled with substantial Medicaid fee cuts for PCPs.