States targeting Medicaid physician pay

Several states have marked Medicaid physician pay for reductions to help cover billions in budget deficits.

Ohio, Arizona and Michigan, for example, have adopted 3% to 5% fee reductions that will translate into millions in physician fee cuts. The moves could signal an end to the wave of Medicaid doctor fee increases in recent years.

The cuts might have been steeper without the $787 billion federal stimulus package, adopted in February, which included $87 billion to increase federal Medicaid matching rates by more than 6% through 2010. The federal government on average pays 57% of Medicaid costs.

But the act did not protect physician pay the way it guarded Medicaid beneficiary coverage. States accepting the additional federal funds must maintain or restore their Medicaid eligibility and enrollment standards to the same levels as they were on July 1, 2008.

"The only two areas left are provider rates or benefits, and there isn't any real money to be saved with cutting benefits," said Monica Coury, assistant director of the office of intergovernmental relations for the Arizona Health Care Cost Containment System, the state's Medicaid agency.

Arizona adopted a 5% across-the-board cut to Medicaid fees for doctors, a $75 million reduction that will be fully implemented on Oct. 1. The cuts will help balance a $3 billion deficit in the state's $10 billion budget, Coury said.

Ohio adopted a 3%, $80 million cut in July that will take effect on Jan. 1, 2010. The reduction will reverse some of the gains realized through a 3% fee increase adopted last year, said Tim Maglione, the Ohio State Medical Assn.'s senior director for government relations.

The 2008 Ohio funding was not evenly distributed. Primary care physicians saw their fees climb by 7% or more, but others had their fees reduced, Maglione said. Following the same pattern, the state will try to minimize the 3% cut's impact on primary care services, said Maureen Corcoran, acting/interim Ohio Medicaid director.

Maglione said lawmakers did not unfairly target health care for reductions. The state faced an $8 billion deficit in its $51 billion budget for 2010-11. "All government services were cut dramatically," he said. Maglione predicted that the state will face additional deficits in several months because of the recession.

Maglione also expects a decrease in physician Medicaid participation, but mostly because the state's Medicaid pay has not kept pace with physicians' costs. Operating a practice in Ohio is 20% more expensive now than it was in 2000, said OSMA spokesman Jason Koma. OSMA plans a Medicaid participation survey in 2010, which would be its first in several years, Maglione said.

Michigan Gov. Jennifer Granholm implemented a 4% across-the-board cut to Medicaid fees on July 1. The state's Medicaid HMOs are expected to pass the reductions along to physicians, who are required to contract with them, said Charles J. Barone II, MD, president of the Michigan chapter of the American Academy of Pediatrics. Physician fees are negotiated with the HMOs and vary around the state. Some doctors are paid more than Medicare rates to see Medicaid patients, Dr. Barone said, while others are not as well compensated.

Granholm and the Legislature are in the midst of budget negotiations that are expected to include additional Medicaid fee cuts to address a $2.8 billion budget deficit for fiscal 2010, which begins Oct. 1. "We're all kind of holding our breath," Dr. Barone said.

Some of the proposed 2010 budgets have included 8% to 12% cuts, he said. The Legislature also has talked of imposing a tax on physicians, but Dr. Barone said lawmakers probably won't consider legislation including this provision until 2010.