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Raising Medicaid Reimbursement Rates

Ilana Novick

Primary doctors with private practices often argue that they can’t afford to take too many Medicaid patients because of the low reimbursements from the government. These doctors compare themselves to small business owners, and, as one doctor told Fredricksburg’s Virginia’s Free Lance Star, many have to ask themselves, “How much can you take until you have to make the very tough business decision that I can’t do this anymore?” 

Virginia and Indiana are taking steps to incentivize more primary care doctors to accept Medicaid patients with a recent approval from the federal government to raise the reimbursement fees for many doctors who treat Medicaid patients, which is hopefully a sign, along with another new dual card program with Medicare, that the state is actively working to join the Affordable Care Act's Medicaid expansion. 

Traditionally, Medicare has had higher reimbursement rates, and the ACA aims to make those rates for treating Medicaid patients equal to those of Medicare by 2014 or 2015. States have to receive government approval, but if they do, the Federal government will pick up the tab for two years. Virginia and Indiana received their approval at the beginning of June, which will hopefully encourage more doctors to accept more Medicaid patients.

Indiana too, recently received approval for their plan, which was a huge relief, especially considering that the reimbursement rates were slashed by 5% in 2010, following a budget crisis. As Indiana Public Media reports, Indiana Hospital Association President Doug Leonard says the increase announced Wednesday restores part of the cut, reducing the 5% cut to 3%. It’s not ideal, but it will make it more worthwhile financially for doctors to accept Medicaid patients.

Virginia’s plan isn’t quite ideal either. Not all doctors will receive the increased reimbursements--they have to testify to Virginia’s Department of Medical Assistance Services that they are primary care doctors or focus on certain eligible specialties. Still, it's a good sign that DMAS numbers show 5,690 doctors have already applied as of the end of April, even before the Federal approval. At the moment, only fee for service doctors are eligible; DMAS is still waiting for approval for doctors participating in managed care. The payments will be retroactive to January, but doctors won’t see the money until July.

Doctors are also only guaranteed two years of payments. Will this mean that Medicaid patients can only look forward to two years of fewer doctor headaches, or is there actually potential for an extension, or more incentives for doctors, whether fee for service or managed care to accept Medicaid patients.

The reimbursement isn’t tied to the state-by-state Medicaid expansion either. Even states that opt out of the expansion can cover people who earn up to 133 percent of the federal poverty level are still able to receive the pay raise.

Virginia hasn't officially agreed to participate in the expansion, though in May it received approval to enter a pilot program that allows 78,000 Virginians to use one ID card for Medicaid and Medicare services, which will facilitate better coordination of long term care services. It may seem like a simple administrative change, but the ability to coordinate services and make the process of seeking care more efficient will save, time, headaches, and maybe even the lives of thousands of Virginians.

The state's Medicaid Director told the Richmond Times-Dispatch that the news is "huge for recipients and their families,” who should find it much easier to get care that had been fragmented between the two programs.

The elephant in the room here is what these changes mean for the future of Medicaid expansion. Virginia Governor Bob McDonnell has demanded various changes as a prerequisite for expansion. Virginia's Secretary of Health William A. Hazel calls the combination ID card "the big one." 

It remains to be seen however, whether that and higher reimbursement rates are baby steps on the road to bigger change, or simply stop-gap measures that only begin to address the problem. For everyone's sake, let's hope it's the former.