Saturday, March 02, 2013

The Coming New "Doc Fix" in Medicaid

As we know, the Affordable Care Act standardizes Medicaid across the states, with a great expansion of coverage for most states.  The Federal government has promised to cover all the additional cost of this expansion for the first three years (2014-2016) and then phase down to 90% by 2020.

Many questions exist around this expansion.  My current one involves the payments that individual states will make under their Medicaid plans to doctors and hospitals ("providers").

Currently, each state sets its own Medicaid reimbursement schedule.  This is generally pretty complicated, but is similar in form to Federal Medicare practices -- but not similar in level of reimbursement.  For NH, if you want to read about the system, go here.  I believe it is safe to say that most states Medicaid systems reimburse providers at less than Medicare rates on average...and definitely less than most private insurers would pay for the same services.  But there has been significant variation in provider reimbursements across states.

So here is the specific question.  If ACA mandates expansion of Medicaid coverage, does it continue the practice of states setting their own provider reimbursement rates?

Generally the answer is yes, but with one pretty large exception -- reimbursement for primary care services.  ACA requires states accepting the Medicaid expansion to reimburse primary care services at Medicare rates, with any additional cost being picked up by the Federal governement.  For a brief description of this part of ACA, see this.  Much more detail can be found.  I have seen one estimate of the cost at the Federal level to be around $6 billion annually.

Ah, but here is the kicker and relation to the title of my post:  this requirement and in particular that the Federal government will pay for the higher rates only applies for two years!

The phrase "doc fix" refers to a law about ten years ago that was supposed to cut Medicare reimbursement rates to providers by a certain amount each year that the rate of increase in total Medicare expenses was too high.  Starting immediately, Congress overrode the mandated increase.  By now, there is around a 30% cumulative cut that is due, and each year Congress has to pass a law (the "doc fix") that keeps that cut from going into force.

Anyone besides me worry that we are going to get into a "Medicaid doc fix" situation?

Look forward:  For two years, any Medicaid service that can be legally lumped into the "primary care" category is going to be paid at the relatively lucrative Medicare rates.  But in two years, states like NH are going to go back to the old rate schedule.  Really?

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