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Obamacare paradox: Medicaid is expanding, but doctors are facing a huge pay cut

(AP Photo/Rick Bowmer)
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Obamacare's Medicaid expansion is facing a new threat from an unlikely source: the law itself.

An additional 9.1 million Americans have been added to the Medicaid rolls in the year since the program expanded under Obamacare. But a scheduled cut in Medicaid payments — built into the law — could steer doctors away from taking new patients covered the program.

That's because a temporary payment bump to Medicaid primary care doctors, included in the Affordable Care Act, is likely to expire at the end of the year. That will mean an average payment cut of 42.8 percent to Medicaid primary care doctors next year, according to a new Urban Institute analysis.

The federal Medicaid reimbursement to doctors vary by state, but they're lower than the rates paid by private insurers and the Medicare program. And that affects doctors' willingness to take new Medicaid patients.

In 2011, 31 percent of doctors said they wouldn't take new Medicaid patients, compared to 18 percent of doctors who said they weren't accepting new privately insured patients, according to a Health Affairs study. The study, which was the first to take a state-by-state look at the issue, found lower Medicaid reimbursements rates made doctors less willing to accept new Medicaid patients.

The ACA's temporary Medicaid payment increase tries to address that issue with a two-year provision requiring that Medicaid primary care providers be reimbursed at Medicare levels. The temporary bump was scheduled for 2013 and 2014, as the Medicaid coverage expansion was ramping up. But that also meant that these payments, worth about $11 billion over two years, would sunset after millions more people joined the Medicaid rolls, which are expected to grow even more over the next few years.

Robert Wergin, president of the American Academy of Family Physicians, said he doesn't think doctors will drop existing Medicaid patients if the better reimbursement rates are allowed to expire. But Wergin, a doctor in a rural Nebraska community, said he thinks it could have a chilling effect on doctors' ability to take new Medicaid patients.

"Remember, we're small businesses, so I don't know who takes a 40 percent cut and comes out on the other side viable," he said.

It's possible that the rate cuts aren't as drastic as the Urban analysis suggests. The analysis excluded managed-care Medicaid plans, which covered about three-quarters of Medicaid beneficiaries in 2011. The think tank points to a 2014 government report that found managed-care plans may pay primary care doctors slightly higher rates than traditional Medicaid, though the difference was no more than 5 percent on average for the states studied.

Some states are trying to plug the gap with their own money. A Kaiser Family Foundation report from late October found that 15 states were planning to extend the Medicaid payments in some form through the 2015 fiscal year (since then, the District also indicated that it also will, according to KFF). Another 23 states said they'll let the payment rates drop and the other states were still undecided.

The state-level decisions don't appear to be politically driven — there's a mix of blue and red states in each category. As Urban finds, nine of 27 states that opted into Obamacare's Medicaid expansion are extending the increase, while six that rejected the expansion are also extending the payments.

So the big diving factor seems to be money. States that aren't planning to extend the fee increase are set to see a much larger drop in federal support in states that are extending it — meaning there's a larger gap to cover with just states funds.

Connecticut reported the number of Medicaid primary care doctors increased from 2,370 in January 2013, when the higher rates kicked in, to 3,256 in December 2013. But there's been scant evidence otherwise whether these boosted payments have increased provider participation in Medicaid.

The federal government hasn't offered its own data on whether the payment bump worked, but President Obama's 2015 fiscal year budget called for a one-year, $5.4 billion extension of the better Medicaid match rate while extending eligibility to physician assistants and nurse practitioners.

The rollout of these payments in 2013 was also delayed by months in many states across the country. Groups advocating for a two-year payment increase say having more time would help determine the effect of enhanced payments.

"I view this as a bridge to buy time to study did it do what it would say it would do? Did it improve access and save overall cost?" Wergin said.

Though the payments are set to expire the end of the year, it's possible that Congress could look at the issue again early next year. The most recent "doc fix" preventing a major cut to Medicare payments is scheduled to expire at the end of March, which could provide another opportunity to extend the Medicaid primary care payments.

Medicare reimbursements is another mess entirely. Congress has acted 17 times in the past 11 years to avoid major scheduled reductions in Medicare reimbursements thanks to a flawed payment formula known as the sustainable growth rate. Wegrin said he doesn't want the higher Medicaid payments to turn into another "doc fix" scenario.