Medicaid primary care pay: The next SGR?

Putting Medicaid primary care rates on par with Medicare’s raises concerns that doctors will face a new kind of payment cliff after just two years.

By — Posted May 21, 2012

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Reid Blackwelder, MD, a family physician in Kingsport, Tenn., said primary care physicians in his state would benefit immensely from a federal proposal raising Medicaid payments to equal what Medicare pays for the same services.

TennCare, the state’s Medicaid program, currently pays him only 60% of Medicare rates, Dr. Blackwelder said. If TennCare had paid 100% of Medicare rates for the previous 10 months of billing, from July 2011 through April 2012, “we would have made an additional $400,000 in our three residency programs,” said Dr. Blackwelder, a professor of family medicine at East Tennessee State University Quillen College of Medicine. Medicaid beneficiaries make up nearly 40% of the residency programs’ patient base.

Nationally, the average Medicaid payment rate is only two-thirds of what Medicare pays, and primary care physicians in most states will benefit from having the rates equalized. The proposed rule, which was issued by the Centers for Medicare & Medicaid Services on May 9 under a provision of the national health system reform law, will pay Medicare rates to primary care physicians for the primary care services they provide to Medicaid beneficiaries for 2013 and 2014. The federal government will pick up the tab for the $11 billion that is projected to go to the states to pay the enhanced rates.

Physician organizations and other health care experts hailed the provision as a breakthrough in the effort to recognize the importance of primary care medicine in improving the health system. Assuming that the law is not invalidated by the U.S. Supreme Court, the federal government is expected to finalize the rule later this year.

What happens after 2014?

But what concerns Dr. Blackwelder and other physicians are the longer-term consequences of establishing a payment boost and then taking it away, just after major coverage expansions under Medicaid and health insurance exchanges kick in starting in 2014. Physicians also expressed concerns about tying the pay increase to Medicare, whose own payment formula has scheduled deep cuts that only congressional action can prevent.

The challenge for primary care practices for the two years of Medicaid parity “is that if they accept more Medicaid patients during that time, if and when the payment returns to below Medicare levels, those practices will suffer by having more patients in a poorly paying insurance,” said Dr. Blackwelder, a board member of the American Academy of Family Physicians. This is why changes to eliminate the payment disparities in primary care need to be made permanent, he and others said.

The pressure that will build in the meantime toward advocating for extensions of enhanced Medicaid pay rates easily could turn the situation into another sustainable growth rate-type scenario, critics of the proposed rule stated. “It’s nonsensical to think a temporary, two-year bump in pay will actually attract and retain doctors to the Medicaid program unless the White House thinks Congress will keep extending these higher payment rates in perpetuity,” Sen. Orrin Hatch (R, Utah), the top Republican on the Senate Finance Committee, said in a statement.

Congress already faces pressure to stop scheduled Medicare physician pay cuts each year, “and this proposed regulation will now create the same dilemma under the Medicaid program. When that rate drops back down after 2014, what will happen to the health care Medicaid beneficiaries receive?” Hatch asked.

Physicians in the field expressed concerns about the need to stabilize Medicare payments in the wake of the proposed rule. A roughly 30% cut to Medicare payments under the SGR formula is slated for 2013 unless Congress intervenes. With the SGR in such a precarious situation, “if you increase Medicaid payments by 30% and then cut the SGR by 30%,” that’s not going to solve much of anything, said Laura Knobel, MD, a family physician in Walpole, Mass., and an AAFP board member.

The agency is going to evaluate the temporary pay boost measure to see how it might improve access to care, Cindy Mann, CMS’s deputy administrator, said during a May 9 teleconference to announce the proposed rule.

From a policy standpoint, this signifies “that the federal government is finally getting serious” about leveling the playing field between primary and interventional care, said Dan Mendelson, CEO of Avalere Health LLC, a consultant group in Washington. Primary care physicians could expect to see Medicaid pay rates for primary care services increase by an average of 34 percentage points, according to the latest available data from the Kaiser Family Foundation.

For the most part, physician organizations welcomed the temporary increase. In a statement, American Medical Association President Peter W. Carmel, MD, said the association was reviewing the rule and would provide official comments to the agency. Payments to physicians who treat Medicaid patients are far too low to cover physician costs, he said. “The AMA supports appropriate Medicaid payments to all physicians to ensure patients have access to high quality care.”

An investment in primary care

Andy Allison, director of the Arkansas Division of Medical Services, said during the CMS teleconference that he hoped the pay boost would help retain primary care doctors in his state. “We always ask a lot of our providers, and now we’re asking our providers to partner to change not only the way we pay, but delivery of services,” he said. “This means practicing differently, and that’s a lot to ask. The boost in reimbursement to primary care we see as an investment in Medicaid’s relationship with providers.”

An increase in Medicaid payments definitely will help physicians just starting up their practices, Dr. Knobel said. As for her own solo practice, which has only a small percentage of Medicaid patients, “this is not going to have much of an impact.”

For most physicians in Massachusetts, “Medicare isn’t one of our top payers by any means,” Dr. Knobel said. “A lot of our commercial contracts are 120% of Medicare, where we’re at risk” for the entire continuum of care for the patient, she added. The relatively few states where Medicaid pays the same as or more than Medicare for primary care services aren’t going to see any rate changes under the rule.

Mendelson said parity wasn’t going to solve all of Medicaid’s existing payment issues. “Physicians care for Medicaid patients because of their love for equity, not for the money primarily,” he said. “Make no mistake about it, this is a very good thing they’re doing here, but it will not adjust for the fact that the payments are so far below commercial and Medicare rates.”

The two-year lifespan of the raise is going to make it difficult for primary care physicians to accept new patients, said Conrad L. Flick, MD, a family physician in Raleigh, N.C., and an AAFP board member. “If you let a lot of new people in and a year-and-a-half later they pull the plug out, then your practice is [going to be] in worse financial shape than it was before,” he said.

Also, not all physicians who consider themselves primary care doctors will benefit. The payment boost specifically applies to primary care services delivered by a physician with a specialty designation of family medicine, general internal medicine, pediatrics or related subspecialties. Certain specialists, such as neonatologists, who offer primary care services stand to benefit from the rule, but obstetrician-gynecologists are not included, federal officials said during the teleconference.

Jim Fasules, MD, senior vice president of advocacy and health policy with the American College of Cardiology, said some but not all cardiology specialties will qualify for the Medicaid payment boost under the rule. Specialists often do provide primary care, but to benefit from the rule, physicians who are not board-certified “must have a billing history that shows that 60% of their codes submitted to Medicaid were for primary care services,” which include both office visits and hospital visits, Dr. Fasules said.

In general, “the ACC believes that all evaluation and management codes should be increased. There are no major differences between a [primary care] visit and a specialist visit,” he said.

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What do states pay for Medicaid primary care?

View in PDF

Click to see data in PDF.

In 44 states and the District of Columbia, Medicaid pays less for primary care services than Medicare does under fee for service. A new proposal would raise these rates to Medicare levels for 2013 and 2014. For the other six states, the primary care rate boost will not apply.

Medicaid pay as percentage of Medicare rate
Alabama 78%
Alaska 140%
Arizona 97%
Arkansas 78%
California 47%
Colorado 87%
Connecticut 78%
Delaware 100%
District of Columbia 47%
Florida 55%
Georgia 86%
Hawaii 64%
Idaho 103%
Illinois 57%
Indiana 61%
Iowa 89%
Kansas 94%
Kentucky 80%
Louisiana 90%
Maine 53%
Maryland 82%
Massachusetts 78%
Michigan 59%
Minnesota 58%
Mississippi 84%
Missouri 65%
Montana 96%
Nebraska 82%
Nevada 93%
New Hampshire 67%
New Jersey 41%
New Mexico 98%
New York 36%
North Carolina 95%
North Dakota 101%
Ohio 66%
Oklahoma 100%
Oregon 78%
Pennsylvania 62%
Rhode Island 36%
South Carolina 86%
South Dakota 85%
Tennessee N/A *
Texas 68%
Utah 76%
Vermont 91%
Virginia 88%
Washington 92%
West Virginia 77%
Wisconsin 67%
Wyoming 117%
Average 66%

* Rates for TennCare, Tennessee’s Medicaid program, vary throughout the state.

Source: Medicaid-Medicare fee index, Kaiser Family Foundation (link)

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How Medicaid pay parity will work

Eligible physicians who provide certain primary care services under Medicaid will be paid at Medicare rates for two years for those services.

  • Eligible physicians must have a specialty designation of family medicine, general internal medicine, pediatrics or a related subspecialty.
  • At least 60% of codes eligible physicians submit to Medicaid in 2012 must be for primary care services, or the physicians must be board-certified in their specialties.
  • States will receive 100% federal funding for the difference between the Medicaid state plan payment amount for selected evaluation and management services as of July 1, 2009, and the Medicare rates in effect for calendar years 2013 and 2014.
  • The Medicaid payment ceiling for children’s vaccine administration will be raised.
  • The increases will not apply to federally qualified health centers and rural health clinics.
  • The estimated federal cost of the pay boosts is approximately $5.5 billion a year for each of the two years.

Source: Medicaid Program; Payments for Services Furnished by Certain Primary Care Physicians and Charges for Vaccine Administration Under the Vaccines for Children Program, Centers for Medicare & Medicaid Services, Federal Register, May 11 (link)

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