Medicaid Fees Could Drop By Half in Some States

A new study by the Urban Institute finds Medicaid primary care fees could drop by nearly half in many states if Congress doesn’t act to extend a temporary increase in the fees it pays for Medicaid patients.

The 2010 Affordable Care Act included a 2-year fee increase that brought Medicaid primary care fees in line with those paid for Medicare patients. The increase expires today. The federal government has fully funded the higher fees in an effort to ease the burden on states. Thus, without last-minute or retroactive action by Congress, the fee increase will disappear Jan. 1 in most states.

Fifteen states have said they will use state funds to continue paying the higher fees for Medicaid patients. They are: Alabama, Alaska, Colorado, Connecticut, Delaware, Hawaii, Iowa, Maine, Maryland, Michigan, Mississippi, Nebraska, Nevada, New Mexico, and South Carolina. Two dozen states have said they won’t tap state funds. The Urban Institute lists 12 states as being undecided.

The Urban Institute looked at billing and payments for 7 common procedure codes in an effort to ascertain the impact of the fee increase’s elimination. They found primary care fees would fall by an average of 47.4% in states that have said they won’t continue paying the higher fees. In the 15 states that plan to use state funds, the drop would have been 31%. Undecided states would see an average reimbursement drop of 31.7% if they choose not to continue paying higher fees.

Though state funding will partially solve the problem, the impact will be limited because the vast majority of Medicaid patients hail from states that won’t fund the higher fees. Nearly three-quarters—71.3%—of all Medicaid enrollees live in states that have said they won’t pay the higher fees after Jan. 1.

The study’s authors note state budgetary concerns are the likely reason many states won’t continue the higher fees. But they warn the change could lead to more unnecessary Emergency Department visits.

“[S]ignificant drops in primary care reimbursement may lead physicians to see fewer Medicaid patients, potentially leading these patients to have difficulty finding a physician or getting an appointment,” the study says. “Although payment is not the only factor in physician acceptance of Medicaid, research has demonstrated a correlation between lower payment rates and fewer physicians accepting new Medicaid patients.”