Medicaid pay turnabout: More states boosting rates

An annual 50-state report on enrollment and spending trends shows that more states are increasing doctor payment rates than are decreasing them.

By Jennifer Lubell — Posted Nov. 5, 2012

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As states begin to recover from the economic recession, a new Medicaid trends report reveals that fewer are eyeing Medicaid physician pay cuts as a way to close budget holes, and that more are starting to boost payment rates to certain health care professionals.

The Kaiser Commission on Medicaid and the Uninsured surveyed Medicaid officials in all 50 states and the District of Columbia. It reported that Medicaid spending growth slowed to near-record low levels in fiscal 2012 and that the pace of program enrollment growth dropped off to 3.2%, the lowest rate since the beginning of the recession. Not all states are out of the woods, but the report’s findings are consistent with assessments that the lingering effects of the recession are fading “and that you would now start to see some improvements,” said Molly Collins Offner, director for policy with the American Hospital Assn.

Slowing enrollment growth is perhaps the biggest indicator that states are on the mend, she said. “That’s usually the first signs of stress in a state’s economy, because more people have lost coverage and have gone on to Medicaid.” The other piece of good news is that the Affordable Care Act’s maintenance-of-effort requirements have had some positive effects on stabilizing eligibility, Collins Offner said. Those requirements prevented states from dropping low-income people in nonoptional populations from the Medicaid rolls.

It’s important to note, however, that Medicaid’s overall spending level hasn’t decreased, it is just not accelerating as fast as it was, said Nina Owcharenko, director of the Center for Health Policy Studies with the conservative Heritage Foundation. “While the percent of the trend is lower, we’re still spending more on Medicaid, and we still have more people enrolled in Medicaid.”

At least 17 million additional people are expected to join Medicaid’s rolls under the health system reform’s expansion provision in 2014.

States with stressed budgets continue to rely on cost-containment methods to sustain their Medicaid programs, including provisions that reduce pay rates to physicians and other health professionals, according to Kaiser’s findings. The expiration of federal stimulus funds that had boosted matching rates for states led to more pay rate reductions in fiscal 2012 than in 2011.

But for 2013, that situation appears to be improving for doctors in particular. Although the overall number of cuts to all Medicaid health professionals still outnumbered payment boosts in fiscal year 2013, “more states increased, rather than cut, rates for certain providers” such as physicians, managed care organizations and nursing facilities, the report found.

Kaiser’s results yield “sort of a mixed bag for providers in terms of payment reductions versus mitigation of cost-containment strategies in the states,” Collins Offner said. Institutional facilities such as hospitals tend to be fairly big targets in states that face tight budgets, “and the survey tells that story.”

For fiscal 2013, 40 states restricted rates to inpatient hospitals, compared with only 10 that increased rates, although that didn’t necessarily mean all of those hospitals were paid less. More states were using the strategy of so-called provider taxes, which are assessments on hospitals designed to drive up the amount of federal matching funds, which typically are used to reimburse hospitals for the tax amounts and plug budget holes elsewhere.

Primary care gains

Certain doctors did better than others when it came to pay rates. In reviewing pay trends for various health care professionals from fiscal 2011 through 2013, Kaiser reported that 10 states in fiscal 2013 planned to increase pay rates to primary care physicians. Some states decided to boost rates to doctors ahead of the two-year pay bump authorized by the Affordable Care Act, which sets rates for primary care services offered by primary care doctors at 100% of Medicare rates for 2013 and 2014. Alaska, which already pays these physicians at Medicare rates, elected to increase rates even further. In the current fiscal year, no states are targeting primary care doctors for rate restrictions.

The 2013 figures for primary care show a reversal of the situation in previous fiscal years. Only two states in 2012 reported increasing Medicaid rates for primary care doctors, whereas 12 said they were decreasing rates.

Overall, 12 states plan rate increases for physicians in fiscal 2013, compared with only three that plan to restrict rates for doctors. Again, this is a big reversal from 2012, when only two states implemented doctor pay increases and 16 imposed rate restrictions.

But in some cases, the rate boosts simply are letting physicians make up lost ground. South Dakota, one of the 10 states increasing primary care pay in 2013, cut Medicaid rates to control costs in fiscal 2012 despite statewide shortages in primary care doctors and other physicians, said Robert Allison, MD, president of the South Dakota State Medical Assn. At the start of fiscal 2013, the rates went back up by 0.5%, he said, months before the ACA’s Medicaid primary care pay bump goes into effect in January 2013.

Dr. Allison said raising primary care payments to Medicare rates for 2013 and 2014 will be critical to maintaining beneficiary access and physician participation in Medicaid.

Primary care rates in Medicaid have lagged behind pay for other physicians, “so this is in many ways a catch-up for primary care,” said Jeffrey Cain, MD, president of the American Academy of Family Physicians and a family physician in Denver. In his view, Medicaid programs should be aligning their rates with proven efforts to improve quality and decrease costs. Increasing payments to primary care doctors means decreased overall costs to the system, he said.

These incremental attempts to boost payments for primary care doctors may not be enough to bring more such doctors into Medicaid, however, which is why family physicians are hoping that the ACA’s Medicaid parity provision will continue beyond the two years for which it is authorized, Dr. Cain said.

In the meantime, emergency physicians are hoping that the federal government will re-evaluate the types of doctors that will receive the enhanced primary care pay rates, said Nathaniel Schlicher, MD, legislative chair of the Washington state chapter of the American College of Emergency Physicians. Emergency doctors “see ourselves as a part of primary care in the sense of access to acute care,” he said. “While we do not do chronic disease management, the need for access to emergency services and the fiscal solvency challenges of many institutions would be improved by emergency medicine being included in higher reimbursement.”

Anne Gauthier, senior program director of the National Academy for State Health Policy, was encouraged by the Kaiser report’s finding that states were looking at options other than cost-containment measures to sustain their programs, such as payment and delivery system reforms. Many states are undertaking initiatives such as multipayer, patient-centered primary care medical homes “that really afford the opportunity for increased quality, better satisfaction and hopefully better access for patients,” she said.

These reforms offer primary care doctors the chance to practice medicine in a more effective and satisfying way, Gauthier said.

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2013 reverses Medicaid doctor-pay trend

Although the number of states decreasing Medicaid pay rates to health professionals overall in fiscal year 2013 still outnumbered the states boosting pay, the opposite is true when it comes to physician pay. That’s a reversal from recent years, in which states used Medicaid doctor pay cuts to help plug budget holes caused in part by the economic recession.

Fiscal year States decreasing
doctor pay
States increasing
doctor pay
2010 20 8
2011 14 6
2012 16 2
2013 3 12

Note: Some planned pay changes reported by states in past survey years might not have been implemented.

Source: “Medicaid Today; Preparing for Tomorrow: A Look at State Medicaid Program Spending, Enrollment and Policy Trends,” Kaiser Commission on Medicaid and the Uninsured, October (link)

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Primary care fares better on Medicaid pay changes

No primary care physician is scheduled to receive a Medicaid pay cut in fiscal 2013. States reversed recent trends in part because they are preparing for a health system reform law provision that will boost primary care Medicaid rates in 2013 and 2014. The number of states changing physician pay rates:

Fiscal year Primary care
2011 increase 5 5
2011 decrease 11 14
2012 increase 2 2
2012 decrease 12 16
2013 increase 10 9
2013 decrease 0 3

Source: “Medicaid Today; Preparing for Tomorrow: A Look at State Medicaid Program Spending, Enrollment and Policy Trends,” Kaiser Commission on Medicaid and the Uninsured, October (link)

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Physicians warned Medicaid block grants would reduce pay

Physicians and other health professionals would stand to see their pay cut by billions if proposals to convert Medicaid into a block-grant program ever were enacted, according to a report by the Kaiser Commission on Medicaid and the Uninsured.

Switching to block grants that cap the amount of federal Medicaid funding would give states more flexibility to tailor their programs, but it also means they would receive fewer total dollars. In today’s economic climate, “lower dollars for states means they’re either facing cutting services, fees or patients from Medicaid,” said Jeffrey Cain, MD, president of the American Academy of Family Physicians.

Republican presidential candidate Mitt Romney backs a plan to repeal the Affordable Care Act, which includes a major expansion of the Medicaid program starting in 2014. He also would cap the amount states would receive to cover Medicaid patients. Focusing on the House budget proposal spearheaded by Rep. Paul Ryan (R, Wis.), the GOP vice presidential candidate, the Kaiser report projected that total federal Medicaid spending would decline by $1.7 trillion over 10 years, assuming that Ryan’s plan took effect in 2013.

Repealing the health system reform law would account for $932 billion of this drop in spending, while the remaining $810 billion would derive from converting Medicaid’s structure to a block-grant program. “Together, these cuts represent a 38% total reduction in federal spending,” the report stated. Ryan’s proposal would cap block grants at lower levels than Medicaid’s current federal spending levels, while giving states more latitude to adjust eligibility and coverage.

Federal spending under this proposal would increase somewhat over time to account for inflation and population growth, but Kaiser estimates that payments to health care professionals still would decrease substantially. Those payment cuts under the block grants would steepen over time, falling by more than 30% by 2022.

Focusing on some of the largest health care entities that treat Medicaid patients, Kaiser projected that payments to hospitals would decline by nearly $364 billion from 2013-22, while nursing homes would experience pay cuts of more than $220 billion over the same period.

Illinois would face reductions of $27.8 billion under the block grant proposal alone over 10 years. The state already is facing serious fiscal problems, and its federal Medicaid matching rate is only 50%, said Danny Chun, a spokesman for the Illinois Hospital Assn. “Obviously, if you lock in federal funding at the current level, that will potentially create some challenges.”

Fewer people also would be covered by Medicaid under these GOP proposals, although changes in Medicaid enrollment could vary depending on states’ ability to reduce the amount they spend per enrollee. In the event the reform law were repealed and states maintained current spending growth levels for each Medicaid enrollee, enrollment reductions would total an estimated 37.6 million by 2022.

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External links

“Medicaid Today; Preparing for Tomorrow: A Look at State Medicaid Program Spending, Enrollment and Policy Trends,” Kaiser Commission on Medicaid and the Uninsured, October (link)

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