Medicaid: Now With Higher Costs and More Bureaucratic Confusion

Ah, bureaucracy. You might think that spending $11 billion on temporarily raising Medicaid rates to match Medicare payments would be relatively easy. You'd be wrong. As Kaiser Health News reports, even something as seemingly straightforward as a temporary increase in Medicaid payments — intended to smooth the transition to ObamaCare's Medicaid expansion by attracting more providers to the program — is beset by bureaucratic headaches:

–It's not completely clear which doctors can get the higher pay. Traditional primary care doctors, such as family physicians, internists and pediatricians, are assumed to be covered. But some specialists, such as pediatric cardiologists, also could be eligible if they provide a certain amount of primary care, according to a preliminary regulation released by the Department of Health and Human Services in May. There is also come confusion about what services are covered under the pay raise. The regulation said the raise will apply to "evaluation and management" of patients, not procedures or performing diagnostic tests.

—Medicaid managed care plans, which today enroll about half of the 60 million Medicaid recipients, are unsure how the additional compensation will be passed onto them and how they will compensate doctors paid a flat or capitated monthly fee.

–The federal government hasn't published its Medicare rates for 2013 so states say they can't tell doctors what the increases will be for Medicaid.

–Doctors are worried there is no deadline on when states have to reimburse them at the higher rates.

As the Kaiser report notes, this makes it hard to attract additional doctors into Medicaid, which was the point of the increase. 

Of course, there's a larger problem with this as well, which is that the temporary nature of the increase is almost certain to create pressure to make it permanent, or at least a permanent temporary increase. 

The reason for this increase is that Medicaid's payment rates are so low that many providers either don't take Medicaid or limit participation in the program. In 2011, for example, about a third of physicians said they wouldn't take new Medicaid patients. With ObamaCare expected to expand Medicaid by somewhere between 10-16 million individuals starting at the beginning of 2014, the idea was to raise payment rates to match Medicare, drawing more providers into the program in order to handle the inevitable increase in demand. 

But as we've seen with Medicare physician payments, it's very hard to Congress to allow even scheduled reimbursement cuts to go into effect. Every year, Congress passes a doc fix to override large payment cuts to physicians. The cost of a permanent fix grows each time. And we end up with is essentially a permanent temporary policy. 

If providers flock to Medicaid as a result of the new payments, we may end up seeing a similar trajectory for this allegedly temporary payment increase. Or, if regulatory hassles continue, we might end in an even worse situation: Few new doctors serving Medicaid, but pressure to keep rates high anyway as a clunky, ongoing attempt to try to attract providers who don't want to deal with the program.