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ACA Medicaid Expansion and Potential Impact on Medical Practices

ACA Medicaid Expansion and Potential Impact on Medical Practices

Due to the Affordable Care Act (ACA), the number of lives covered under Medicaid or Managed Medicaid insurance surged from 55M in 2013 to over 71M lives in 2015.  Although most providers know that on average, Medicaid reimburses lower than Medicare, many providers are unaware that the rate at which Medicaid pays for a procedure, on average, can vary greatly from State to State.   For instance a state like New Jersey, has reimbursements for CPT codes for Medicaid patients at about 35% of what Medicare would pay while a state in the Midwest pays 100% of the Medicare Rate.   The following illustrates this payment difference to a practice if the state pays, on average at 55% of Medicare for Medicaid patients:  a practice would receive $100 for a Medicare Patient while only about $55 for a Medicaid patient for the same patient service.   This type of policy has an unintended consequence for which providers either ‘cap’ the number of Medicaid patients or do not accept Medicaid.  What ends up happening in that the patient, with no copay, then uses the ER as their Primary Care doctor, driving up costs.

Why is there a difference by State?

The current law and policy associated with people who are eligible for Medicaid pushes the management of Medicaid and burden on the States.   Even though the states need to manage Medicaid at the state level, the federal government provides funding to states (Medicaid is the third largest domestic program after Medicare and Social Security).  For this reason, Medicaid is usually the largest source of federal funding for the state budget.   So the states receive funding for Medicaid but in many cases, not enough funding to reimburse providers for services at the same rate as Medicare.   Since States need to balance their budgets, they identify methods to reduce the cost of the program including reducing the amount the state will pay to below the standards established for Medicare Patients.  This reduced reimbursement is a major reason as to why many providers limit the number of Medicaid patients in a panel or limit the managed Medicaid plans accepted by the practice.

What are some items to consider for a practice related to Medicaid and Managed Medicaid insurances?

Each practice needs to evaluate the contract amount for Medicaid and Managed Medicaid plans.   If the contract amount is above the ‘break even’ plus a reasonable profit amount, then no action needed.   If some of the Managed Medicaid plans are below the minimum accepted amount then the practice should either renegotiate these agreements or consider terminating the contract for this insurance.  When a contract is terminated, many patients will stay with the practice, by switching Managed Medicaid plans.  There was two years that the ACA required each state to reimburse for routine PCP services at the same rate as Medicare.   Since congress did not renew the enhanced reimbursement, the states usually returned to a policy of reduced reimbursements below Medicare.  Most practices should be evaluating Medicaid and Managed Medicaid plans at least 1x per year.

Why Independent Primary Care Practices provide a cost effective investment for Medicaid and Managed Medicaid plans?

The state is managing to a state budget so they provide a base rate of reimbursement to providers based on a number of factors.  This reimbursement rate is usually less than the rate reimbursed by Medicare.  Are some practices reimbursed above this base rate?  Yes.     From a payers perspective, primary care is a very effective investment in their treatment dollars.   The better a primary care provider does at managing the patient care at their practice, usually the lower the cost to the payer.  It is uncertain if the primary care providers being absorbed in these Integrated Delivery Networks are referring more patients or the IDN is identifying patients in their practice to send to their specialists, laboratories and/or Hospitals.    An independent PCP Practice (not owned by a Hospital or IDN) could argue they have less influences to increase cost/utilization of Tests and Hospital services.   This is an interesting topic to explore which would require much further analysis than what can be provided in this short article.

How could a change in Managed Medicaid plan impact patients?

If a practice eliminates a Managed Medicaid plan due to reimbursements being below an acceptable level, then the practice should notify the patients of an insurance that will no longer be accepted.  The patient can either obtain their Medical records and transfer to another practice or in many cases, switch to another Managed Medicaid plan accepted by the practice.  From a patient’s perspective, they will need to do some work due to their insurance not being accepted by the practice any longer.

As Medicaid expands and states look to decrease costs, Medical Practices will need to continue to evaluate the impact of the Medicaid and Managed Medicaid plans on their practices.