• Sometimes good things cost money, Medicaid edition.

    One of the perennial complaints about Medicaid is that many doctors won’t accept it as insurance. That’s primarily because it under-reimburses. Some have used physician avoidance of Medicaid as a reason to argue that we should scrap the program. I’ve argued that physician avoidance is a reason to increase reimbursement. That’s about to happen:

    Primary care doctors could get a pay raise next year for treating Medicaid patients, under a rule announced by the Obama administration Wednesday.

    The proposed regulation implements a two-year pay increase included in the 2010 health-care law. The increase, effective in 2013 and 2014, brings primary care fees for Medicaid, which covers indigent patients, in line with those for Medicare, which insures the elderly and some disabled patients.

    Although Medicaid is jointly funded by states and the federal government, the pay boost would be covered entirely with federal dollars totaling more than $11 billion over the two years it would be in effect.

    Congress automatically appropriated those funds when it adopted the health-care law, so it will not need to act now.

    Granted, I’m a pediatrician, so feel free to accuse me of bias here, but this is fantastic news for those of us who see a lot of patients on Medicaid. It also has a secondary effect of increasing payments for a lot of primary care providers, also a problem in the US. There’s not much to hate here, other than the cost.

    But let’s be real here. We’re talking about $5.5 billion a year. Yes, that’s a lot of money, but compared to overall health care spending?

    That’s almost infinitesimal. But what about if we only compare it to Medicaid spending?

    It’s still not that much. Moreover, it’s entirely covered by the federal government for two years, so in the short term, states have little to complain about.

    Now I’m not suggesting there aren’t problems here. This is all part and parcel of the ACA. If that gets overturned by the Supreme Court in June, all of this goes away. The same holds true if the whole law were repealed next year. And, in two years, it’s going to be a struggle to find the additional money to keep this going, especially if some of it falls to the states.

    But let’s face some facts. Medicaid is still a pretty lean program, and costs less than putting people on private insurance in the exchanges. We face a primary care shortage, in large part because we don’t reimburse those physicians as well as we do specialists. And many docs do avoid Medicaid because the program pays so much less than Medicare and private insurance. This small change impacts all of those problems at the same time.

    Sometimes good things cost money. Yeah, there’s no money now, but wait until they threaten to cut Medicare reimbursements in a couple months during the next “doc fix” crisis, and you’ll see how quickly people’s tunes change. Shoring up Medicaid in the eyes of providers while simultaneously making it more enticing to be a primary care doctor? This here is a bargain.


    • I hear many individuals, including physicians and administrators, complain Medicare and Medicaid under-reimburse for medical services on the one hand and on the other hand I hear the quality gurus, health economists, and heatlh services researchers complain about the 30% to 50% waste in the health care system.

      We cannot have it both ways, either there is substantial waste and Medicare and Medicaid are paying about the right amount overall or there is not as much waste as has been painstakingly identified over the past 30 years – which I obviously don’t believe.

      My point is not to say each service is adequately reimbursed, but that overall there is ample money in these programs to reasonably reimburse providers, perhaps after reseting prices for individual services, after we cut out the waste.


      • It is totally possible for both to be true. There (1) can be waste and (2) primary care can be under-reimbursed. But telling those docs to accept lower pay until SOMEONE ELSE identifies and eliminates the waste is not going to necessarily work. This is especially a problem if the waste is someone else’s fault. Also, Medicaid spending has been rising more slowly than private or Medicare, and is already lower in general. Why do you believe there is more waste in Medicaid than elsewhere?

        We can engage in both activities at the same time without one being dependent on the other.

        • Specific example: probably high-tech imaging (MRIs and CT scans). There aren’t good guidelines on when to use and when not to use them. Medicare’s only lever to control expenses there is to cut the rates. They cut the rates. Then physicians do more imaging – especially if they own the scanners themselves. If Medicare keeps doing that, it’s entirely possible that they are paying too little per service to allow physicians a reasonable margin with reasonable volume, and yet there is still too much volume.

        • A couple of responses to your response:

          I don’t think it is reasonable to ask society to spend more money on Medicaid when we can do a better job reallocating the money already in the program to primary care – which I think is long overdue. Doctors and policy makers must set the tone and do the right thing concerning how money is distributed within primary and specialty care; after all doctors and policy makers came up with the reimbursement rates in the first place.

          I did not address waste within the Medicare/Medicaid programs, which I happen to think is small by comparison to their private party counterparts. I’m addressing overall waste in health care and how it leads to overspending in areas where it can get away with it like specialty care and too little in others like primary care.

          I’m looking at health care as a whole and stating the seemingly obvious fact that if there is one truth about health care it is that health care is not short on money. Figure out how to use the money already allocated to the sector more effectively and get on with it.


          • Doctors do NOT set the rates for Medicare/Medicaid. There’s a committee that gets to split up the total pie of money, but they do NOT get to determine how much each service reimburses in absolute terms.

            Doctors on that committee can however determine what the split is between primary care and subspecialists. There are twice as many subspecialists as primary care docs on that panel, so of course the subspecialists choose to give themselves a disproportionate size of the pie and screw over the primary care guys.

            • Not quite right.

              Though the RUC is budget neutral and dominated by specialists as you suggest, individual payment for services are targeted by changes to RVUs.

          • In response to Jincal:

            I disagree that it’s unreasonable to ask society not to spend more money on Medicaid, and to just work off the waste or overuse already in the system. We have evidence that Medicaid beneficiaries do tend to have poorer physician access because of the low rates. To get around that, you need to pay docs more. To get at the other waste, you could do something like health homes or ACOs – but docs will not participate if the rates are so low, so you may well have to pay more to start.

            Incidentally, the costliest groups on Medicaid are seniors and people with disabilities. The bulk of their dollars are actually long-term care dollars. Within long-term care, you could say that we can and should shift people into community based settings and out of institutions to save money. And I agree! But you cannot generally divert people who are already in nursing homes* – they have lost the skills necessary to live in the community and are too frail. States without a robust HCBS infrastructure (Indiana is one of the biggest culprits) will take time to build such an infrastructure. And nursing homes may be the least bad choice for people with very significant disabilities and/or cognitive impairments and/or unstable clinical conditions that can’t be managed in the community. So again, on the LTC side, you may well have to invest first in more community-based services before you can start placing people in the community.

            * more true for seniors. the Money Follows the Person program has diverted a lot more younger people than seniors. those folks generally want to and can achieve independence; many of them may have been inappropriately placed in a NH, or they may have recovered enough but there weren’t the services to support them. that doesn’t detract from the main point, though.

    • To amplify Aaron’s response:

      Not only is continuing to underpay primary care providers for Medicaid services not a useful way of attacking waste in the program, it probably actually amplifies waste, since the two important effects of discouraging primary care providers from accepting Medicaid patients are to prevent Medicaid patients from getting preventative and early intervention care that decreases costs overall and to push Medicaid patients into ER’s, costing more in the first place and also encouraging them to present later, sicker, and more costly to manage in the course of illnesses.

      In addition, it is worth noting that many of the same people who comment aggressively on waste in Medicaid and Medicare are the same people who oppose efforts to deal with waste effectively and rationally in programs like the IPAB. It almost makes you wonder if they are less interested in waste and more interested in trying to damage or destroy the programs.

    • Great Medicaid patients will get more options! More options will result in better competition and increased quality! Exciting…

    • And now we’ve created a new Doc Fix issue…what are the odds that is allowed to expire in 2015? Just one of numerous tricks to game the CBO estimate of ObamaCare to reach the claim it’s breakeven or better.

      • Actually, the doc fix is assumed to be put in place when the CBO makes its estimates of the impact of the ACA. The administration has not only worked in favor of the doc fix, but has pushed for the doc fix to be permanent and the underlying legislative glitch to be ended. It has been the GOP in the Senate and House that has held up the doc fix as part of its budget brinksmanship.

        Once more for emphasis, not passing the doc fix is NOT part of the savings calculated to be generated by the ACA, and the CBO estimates of health care costs have assumed that the doc fix will continue to be passed.

        • I think you’re misunderstanding him. What he means is that this has created another “doc fix” situation, because the increase in primary care reimbursement is only scheduled to last 2 years and then revert back to the lower levels we have today.

          So after 2 years either we go back to Mediciad docs refusing patients due to low reimbursement, or more likely, the higher reimbursements are allowed to continue just like we do with the doc fix every year. You can bet that as that date approaches we’ll hear about how it needs to be extended to ensure the porr have access to primary care. And this would of course serve to increase the cost of ACA.

          You can think that is good or bad, but it’s just one of the many ways that the projected cost of the bill was understated.

          • I see what you’re saying.

            Historically the way that has been proposed to maintain budget neutrality is to cover the increases in payment to primary care with decreases in payment for the highly paid specialties. There is a obviously a lot of room in the budgets for some specialties before people are standing in the street with signs reading “will operate (or read MRI) for food.” This would require some heavy lifting politically, though.

            Nonetheless, the doc fix is completely separate from the ACA and is not counted in CBO’s estimates of budget considerations for the ACA.

    • Its still the case that physicians of all specialties in the US make 2-3 times higher incomes than physicians in other developed countries like the UK or Germany. Why? Why should physicians continue to expect to be the wealthiest people in their communities?

      • Actually, for the last few years primary care doctors in Britain have earned more per year on average than their US counterparts.

        Relative to their levels of training and education, US primary care doctors make fairly low incomes. It is specialists, especially in some specialties, who earn the very large incomes that contribute to the high average income for physicians.

        The payments for Medicaid for many services, especially for pediatricians, are often less than the combined cost of the services and record keeping and billing. I have actually been in a community where pediatricians stopped billing Medicaid for immunizations since the cost of processing billing exceeded the payment. They provided the service at no charge and ate the cost of the drugs themselves. In many communities doctors deal with this issue by refusing to see Medicaid patients or by severely limiting the numbers of Medicaid patients they see.

        As I have said above, this situation leads to increased Medicaid costs by denying Medicaid patients access to normal, relatively inexpensive outpatient care and of timely intervention with relatively inexpensive early interventions and preventative care, and instead throwing them into ER’s where costs are much higher in conditions that may require much more expensive and intensive care due to earlier neglect.

    • Lawyers, accountants, CEOs also make 2-3 times what their occupations in other countries make.