By Erica Cohen

On November 1, 2012 the government announced a temporary increase in Medicaid primary care payments to physicians as part of Obamacare. The rates will match Medicare payments, which are higher, from January 1, 2013 through December 31, 2014. The goal is to induce more physicians to participate, which makes sense. There will be many more Medicaid patents, and we already have too few participating providers. However, the increase may not work as planned.

The temporary rate hike is unlikely to convince providers who do not currently accept Medicaid to change their mind. The winners will be providers who already accept Medicaid, since their reimbursement may be even higher than private payer rates.

Although Medicaid reimbursement rates vary by state, the national average for physician services is only two-thirds of the Medicare rate. The increase in reimbursement is intended to improve access to treatment for Medicaid patients and encourage preventative care to avoid serious illness and costly hospitalization.

Although an increase in Medicaid reimbursement may seem like a welcome incentive for physicians, it is a short-term inducement that fails to consider how physicians will continue to treat Medicaid patients once the reimbursement rates return to baseline after 2014.The final rule provides increased rates for a mere two years, which isn’t nearly enough time to encourage Medicaid participation by those physicians who have already opted out.

Additionally, the increased reimbursement is available only to physicians who specialize in family medicine, general internal medicine, and pediatric medicine – with some exceptions for certain subspecialists, like pediatric cardiologists, who provide primary care within their scope of their practice.

Medicaid patients are typically sicker than privately insured patients, which means they are likely to require more time and energy from providers. Given that there is a significant physician shortage, many providers are even less likely to accept sicker, more time-consuming patients when they already have too many to manage. Furthermore, while approximately 74% of physicians accept Medicaid, only 64% are accepting new Medicaid patients due to declining reimbursements.

Long-term Medicaid reform is the only solution to this problem. While many oppose Medicaid expansion, studies show that Medicaid improves access to care, results in less medical debt, and lowers mortality rates.

A Harvard School of Public Health report released in August 2012 found that in three states (Arizona, Maine, and New York) that had expanded Medicaid, the death rates declined on average by more than 6% per year compared with a 0% reduction in neighboring states that did not expand Medicaid. Translated into raw numbers, for every 176 people who gained coverage, one death per year was avoided. 

Medicaid expansion will only be effective if reimbursement rates are increased indefinitely and the physician shortage is eliminated. While upfront costs are significant, cost savings from reduction in long-term serious illness and hospital inpatient stays could be significant.

The temporary increase in Medicaid reimbursement under Obamacare is a Band-Aid on a gaping wound.