Congressional leaders are finalizing the details of the massive
health care legislation behind closed doors. Its fate may well
depend on state officials willingness to accept the future cost of
a massive expansion of the Medicaid program.
Congress and the Obama Administration are relying on Medicaid to
cover at least half of those who would become insured. The
President and the congressional negotiators seem to understand that
opposition from the states could sink health care legislation, so
they have proposed various means of having the federal taxpayers
pick up a greater share of the cost of the Medicaid expansion.
One of the most important but little discussed issues of adding
at least 14 million people to Medicaid is "Who will see them?" It
is widely acknowledged that lower Medicaid reimbursement is one of
the reasons people on Medicaid have less access to care than other
Americans. Earlier this year, researchers at the Urban Institute
conducted a study of Medicaid physician fees and acknowledged that
"physicians have typically been less willing to take on new
Medicaid patients than patients covered by other types of health
The House Bill
In developing its part of H.R. 3200 (the health care legislation
now being reworked behind closed doors), the House Committee on
Energy and Commerce implicitly recognized this access problem and
therefore proposed to increase payments to primary care
practitioners. Section 1721 would raise Medicaid rates to not less
than 80 percent of Medicare rates in 2010, 90 percent in 2011, and
100 percent in 2012 and thereafter.
Realizing the states would object to this provision as an
unfunded mandate, the committee provided a 100 percent federal
matching rate for the increase between a state's current
reimbursement level and the new required levels.
Currently, Medicaid reimbursement to physicians is set by the
states, which has resulted in wide variation among the states. In
presenting budget estimates of the health care legislation, the
Congressional Budget Office (CBO) provides Congress with averages
and national data. CBO does not produce state-by-state results,
which obscures the massive cost shift from state taxpayers to
federal taxpayers that the bill proposes.
Insight into the state-by-state impact is found in the Urban
study on Medicaid physician fees published in April. On a national
basis, the Urban researchers estimate that Medicaid rates to
primary care physicians is 66 percent that of Medicare. But on a
state-by-state basis, primary care reimbursement varies from 36
percent in New York and Rhode Island to 140 percent in Alaska.
The impact of increased Medicaid match rates under Section 1721
may be surprising. Wealthier states such as New York, Rhode Island,
and New Jersey currently pay their primary care physicians the
least, so they will benefit the most from this provision.
It is unclear whether Congressmen from states that already pay
their Medicaid primary care physicians above or near Medicare rates
realize that the taxpayers in their states will receive no benefit
from this provision while they subsidize the cost of increasing
reimbursement in other states.
Reimbursement Roller Coaster
States that already pay their physicians more than Medicare are
likely to freeze physician reimbursement for a few years, waiting
for the enhanced federal match rate to then pick up the difference.
After rates fall below Medicare, they would increase rates
again--but this time with 100 percent federal funding.
The Medicaid match rate switch raises another important
question: How much of the $1 trillion in new spending simply goes
to buying out state budgets or substituting taxpayer funding for
private spending? Thus far, CBO has not released that data.
Smith is Senior Fellow in the Center for Health Policy Studies
at The Heritage Foundation.