Many physicians see Medicaid pay cut as enrollment rises

Twenty states enacted reductions in 2010, and more adopted cuts for 2011. But with stimulus money running out, states are bracing for the worst.

By Doug Trapp — Posted Oct. 11, 2010

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Twenty states cut Medicaid physician pay in fiscal year 2010 -- the most since 21 states did so in fiscal 2004 -- as states struggled to cope with strong Medicaid enrollment growth, according to an annual survey of state Medicaid programs.

Meanwhile, 11 states, six of which also cut pay in 2010, and the District of Columbia have enacted physician pay cuts for fiscal 2011, which in many states began June 30.

But the worst of Medicaid pay cuts may be yet to come.

Many of the 2010 and 2011 pay cuts were small in scale and more likely to affect specialists than primary care physicians, because states sought to preserve access to primary care, said Vernon K. Smith, PhD, managing principal of Health Management Associates, a research and consulting firm. He's the co-author of the report, which was released Sept. 30 by the Kaiser Family Foundation.

More states would have adopted Medicaid pay cuts if not for the $87 billion in Medicaid funding provided by the 2009 economic stimulus package, Smith said.

Thirty-eight states used stimulus Medicaid funds to prevent or reduce pay cuts to physicians, hospitals or others caring for Medicaid enrollees in fiscal 2010, which ended on June 30, 2010, in most states. Thirty-five states used the funding to prevent or reduce pay cuts for the same groups in fiscal 2011. Eight states increased Medicaid fees in fiscal 2010; another eight did so in fiscal 2011. However, the report does not detail the scope and size of the pay hikes or cuts.

States may face their toughest decisions yet when the second, more limited installment of enhanced stimulus Medicaid funding runs out on July 1, 2011, Smith said. Some states' Medicaid costs could increase by 25% or more in fiscal 2012.

"All of the easy policies have been enacted. What do you do? You really can't cut provider pay rates much more," Smith said.

Reversing course

The physician pay cuts are part of a reversal of Medicaid trends. As recently as 2007, no states planned to reduce program fees for doctors. Two dozen states adopted Medicaid pay hikes that year.

However, Medicaid pay remained relatively low, even before the recession. It averaged 72% of Medicare rates in 2008 for the same services, according to an article by Urban Institute researchers published online in Health Affairs in April 2009.

"Medicaid patients already face significant difficulty accessing care due to low physician-reimbursement rates, and these cuts will only make the situation worse," said American Medical Association President Cecil B. Wilson, MD.

Medicaid enrollment grew by 3.7 million people between December 2008 and December 2009 -- its largest one-year increase since the 1960s. The number of Medicaid enrollees has reached 48.5 million people. The 8.2% growth rate is about two percentage points faster than states projected in their budgets, according to the Kaiser Family Foundation report, "Hoping for Economic Recovery, Preparing for Health Reform: A Look at Medicaid Spending, Coverage and Policy Trends." It is based on Medicaid program surveys conducted in July and August.

An influx of new governors will grapple with these budget decisions. Between 24 and 37 states will elect new governors on Nov. 2, said Elizabeth Kellar, president and chief executive officer of the Center for State and Local Government Excellence, a nonpartisan research group that advises state and local governments.

Even in states where physicians have not faced cuts, others in the health system have. Overall, 39 states cut Medicaid rates for at least some health professionals in fiscal 2010. Thirty states enacted such cuts in fiscal 2011.

Colorado, Louisiana, Maryland, Minnesota, Missouri and Nevada cut physician Medicaid pay for fiscal 2010 and 2011. In Louisiana, physicians are upset not only at the cuts but also that the state is asking doctors to return a portion of Medicaid money they already have received.

Louisiana cut physician fees three times in the last 15 months -- in August 2009 and January and August 2010 -- for a combined reduction of nearly 10%, said Lisa Faust, spokeswoman for the Louisiana Dept. of Health and Hospitals. However, the department was not able to implement the first two targeted reductions until June 2010. Department staff need months to program changes to its 30-year-old payment system, Faust said. The department will deduct the Medicaid overpayments from upcoming physician reimbursements.

Faust asked physicians to have patience with the department, which is soliciting bids for a new payment system, made possible by a grant from the Centers for Medicare & Medicaid Services.

Farida Baig, MD, a nephrologist in LaPlace, La. -- about 30 miles west of New Orleans -- doesn't understand how the state can ask for its Medicaid pay back. "That is going to be really hard on physicians' office practices," she said.

Medicaid has always been difficult to deal with in Louisiana, said Dr. Baig, who has practiced in the area since 1983. Medicaid requires her to treat patients without guaranteeing payment. Medicaid denies about half of the claims she submits. She said the program is basically "forced charity."

In late September, Dr. Baig and the three other nephrologists in her practice reached a difficult decision -- they could no longer accept new Medicaid patients. She'll keep caring for her several existing Medicaid patients. But others will have to travel to New Orleans, or about the same distance to Baton Rouge, to receive dialysis or seek care in emergency departments.

Missouri physicians had been seeing their Medicaid pay going up -- but not anymore. The state increased overall Medicaid pay from about 35% of Medicare to about 65% a few years ago. Recently, the state reduced any Medicaid fees paid above 90% of Medicare to 90%, said Tom Holloway, director of government relations for the Missouri State Medical Assn.

In Minnesota, the state reduced Medicaid pay for specialist services by 6.5% in 2009, followed by a 4.5% cut for nonprimary specialist services in 2010, said Patricia Lindholm, MD, president of the Minnesota Medical Assn.

However, very few Minnesota physicians have dropped out of Medicaid. The state requires doctors to participate in it to be reimbursed for caring for state employees, said Dr. Lindholm, a family physician. "I don't know of any physicians who are not taking Medicaid in Minnesota," she said. Further pay reductions would force physicians to shift the costs of caring for Medicaid patients to insured and self-pay patients.

Lower reimbursement and other pressures, including difficulty recruiting physicians to rural areas, are leading many physicians to sell their practices to hospitals or health systems, said Dr. Lindholm, who practices in Fergus Falls, Minn., about 60 miles southeast of Fargo, N.D. She and her colleagues sold their 50-physician group practice to the local hospital, Lake Region, on May 1.

Colorado's two cuts were more significant. The state increased Medicaid evaluation and management codes to 90% of Medicare rates in 2008, but enacted two across-the-board 5% Medicaid pay cuts in the last two years, said Mark Laitos, MD, immediate past president of the Colorado Medical Society.

The increase helped physicians in Colorado perform what they see as a community service, but still did not cover the expense of treating Medicaid patients, Dr. Laitos said. The cuts have left some physicians more willing than others to accept Medicaid enrollees. However, the state Medicaid agency had the authority to enact even deeper cuts, Dr. Laitos said.

Some pay increases

Five states, including Alaska, bucked the Medicaid pay trend by increasing fees at least slightly in both fiscal 2010 and 2011. The others are Maine, Mississippi, Nebraska and North Dakota, according to the report.

Alaska Medicaid pay is based on a formula similar to that of Medicare. However, Alaska Medicaid reimburses physicians almost 50% more than Medicare, said Jim Jordan, executive director of the Alaska State Medical Assn.

The Alaska Medicaid program is easier to work with than Medicare, said J. Ross Tanner, DO, past president of the Alaska State Medical Assn. and an internist specializing in diabetes and lipids in Anchorage.

Dr. Tanner is frustrated with Medicare the same way physicians in other states are with Medicaid, which in Alaska might process a claim in a week while Medicare might take months. "That's getting a little bit better, but it's just a bureaucratic mess," he said.

The report also found a mixed bag of other significant Medicaid trends regarding benefits and state costs.

States' share of total Medicaid spending declined for the first time -- by nearly 11% in fiscal 2009 and 7% in fiscal 2010. The stimulus Medicaid funding partially relieved states' burdens, report co-author Smith said.

Also, 32 states expanded Medicaid benefits, mostly modestly, he said. Of these states, about half took advantage of an option in the Children's Health Insurance Program Reauthorization Act to expand eligibility to legal immigrants or children. Others streamlined their Medicaid and CHIP applications.

However, 20 states cut or restricted Medicaid benefits in fiscal 2010 while 14 others did so for fiscal 2011. Most of these cuts focused on optional benefits, such as dental and chiropractic care, the report found.

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States changing Medicaid pay

Twenty-five states and the District of Columbia cut Medicaid physician pay for fiscal 2010, fiscal 2011 or both, while pay was raised in 11 states.

2010 increase: Montana, New York, South Carolina

2011 increase: Delaware, Kansas, Oklahoma

2010 and 2011 increases: Alaska, Maine, Mississippi, Nebraska, North Dakota

2010 cut: Arizona, Iowa, Kansas, Michigan, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Utah, Vermont, Washington, Wisconsin, Wyoming

2011 cut: Connecticut, District of Columbia, Massachusetts, South Dakota, Texas, Virginia

2010 and 2011 cuts: Colorado, Louisiana, Maryland, Minnesota, Missouri, Nevada

Source: Health Management Associates

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Stimulus-protected Medicaid pay

Most states used their share of the American Recovery and Reinvestment Act's $87 billion in funding to prevent pay cuts to physicians, hospitals and others treating Medicaid patients. States took the following actions:

Fiscal 2009 Fiscal 2010
Avoided or reduced cuts to practitioners 38 35
Closed or reduced Medicaid budget gap 36 43
Helped pay for increased Medicaid enrollment 33 41
Closed or reduced overall state budget shortfall 44 38
Avoided benefit cuts 36 37
Avoided or restored eligibility cuts 29 28

Source: "Hoping for Economic Recovery, Preparing for Health Reform: A Look at Medicaid Spending, Coverage and Policy Trends," Kaiser Family Foundation, September (link)

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External links

"Hoping for Economic Recovery, Preparing for Health Reform: A Look at Medicaid Spending, Coverage and Policy Trends," Kaiser Family Foundation, September (link)

"Trends in Medicaid Physician Fees, 2003-2008," Health Affairs, April 2009 (link)

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