Medicaid a Hard Sell For Many Physicians

Treatment for the increasing number of Medicaid patients is becoming concentrated among an ever-smaller proportion of physicians, who tend to practice in large groups, hospitals, academic medical centers, and community health centers.

The decreasing Medicaid physician pool over the last decade comes despite increases in Medicaid payment rates and enrollment, according to a study by the Center for Studying Health Care System Change (HSC) released in August.

The HSC is a nonpartisan policy research organization that provides information on the nation's health system.

The study is based on the HSC Community Tracking Study Physician Survey, a nationally representative telephone survey of U.S. physicians, including about 12,000 physicians for the 1996 to 2001 surveys and more than 6,600 physicians for the 2004 and 2005 data.

The study found that in 2004 and 2005, 14.6 percent of physicians reported that they received no revenue from Medicaid, which was an increase from 12.9 percent who reported that in 1996 and 1997. There were also small increases in the percentage of physicians who were not accepting new Medicaid patients.

“A more striking trend is that care of Medicaid patients is becoming increasingly concentrated among a smaller proportion of physicians who tend to practice in large groups, hospitals, academic medical centers, and community health centers,” said the HSC researchers. “Relatively low payment rates and high administrative costs are likely contributing to decreased involvement with Medicaid among physicians in solo and small-group practices.”

Sylvia Muzquiz-Drumnond, M.D., a member of the APA Committee on Public Funding for Psychiatric Services, agreed that an enormous amount of administrative overhead is associated with treating Medicaid patients. The Medicaid payment rates do not reimburse the cost of paying employees who perform unqualified but needed tasks to file for payment.

“This is a huge [cost] factor,” said Muzquiz-Drumnond.“ At some point something has to give; if not, we will be losing more providers.”

Medicaid reimbursement rates, which are considerably lower than payment rates physicians receive under Medicare or private insurance, have long deterred physician participation in Medicaid, according to the study. It found that more than one-fifth of physicians (21 percent) accepted no new Medicaid patients in the period 2004 through 2005, which was a rate six times higher than for Medicare patients and five times higher than for privately insured patients, according to the HSC Community Tracking Study Physician Survey.

About half of physicians surveyed reported accepting new Medicaid patients in 2004 to 2005, compared with more than 70 percent who said they accepted new Medicare and privately insured patients.

A December 2005 study published in Medical Care Research and Review found low physician participation in Medicaid negatively affects enrollees' access to medical care.

The study pointed out that Medicaid payment rates increased modestly relative to Medicare rates between 1998 and 2003, despite some states reducing or freezing payment rates in the last few years because of severe budget pressures and rising Medicaid costs. Medicaid enrollment, however, increased substantially during this period—8 percent between 2000 and 2003—which was likely a result of eligibility expansions, high annual increases in private health insurance costs that made that coverage unaffordable, and slow economic growth, said the study.

“Despite these trends, physician involvement with Medicaid decreased slightly over the past decade,” said the study.

For most physicians who care for Medicaid patients, that group represents a small part of their practices. Among those physicians, about 60 percent derive less than 20 percent of their practice revenue from Medicaid. However, about one-fourth of physicians derive 30 percent or more of their practice revenue from Medicaid, and they account for more than half of all physician care provided to Medicaid patients.

Physicians with larger percentages of Medicaid patients in their practices appeared to increase the number of such patients they accepted. The proportion of all Medicaid physician revenue accounted for by physicians who derived 30 percent or more of their practice revenue from Medicaid increased from 43.1 percent in the period 1996 to 1997 to 51 percent in the period 2004 to 2005.

At the same time, the proportion of Medicaid revenue received by physicians who derived less than 20 percent of practice revenue from Medicaid decreased from about 38 percent to a little more than 28 percent.

The study authors theorized that physicians who already had large numbers of Medicaid patients were more inclined to increase their acceptance of additional Medicaid patients, while those with fewer, and thus less comfort or familiarity with these patients and the Medicaid program, decreased their Medicaid participation. For physicians who derived between 1 percent and 9 percent of their practice revenue from Medicaid, the percentage saying they were not accepting new Medicaid patients increased from 20.7 percent in 1996-1997 to 27.1 percent in 2004-2005.

The study also identified a shift away from small, office-based practices providing care for Medicaid beneficiaries to larger group and institution-based practices. A growing percentage of physicians in solo or small group practices derived little or no revenue from Medicaid compared with physicians in institutional and large group settings, while more than half of institutional providers derived 20 percent or more of their practice revenue from Medicaid.

Muzquiz-Drumnond said that the Medicaid rate-setting mechanism favors high-volume, low-cost providers, which puts those with higher practice overhead, such as solo practitioners, at a disadvantage. The imbalance stems from Medicaid's lack of reimbursement for the substantial administrative costs associated with the program's paperwork requirements. This rate-setting approach works against solo practitioners, but it helps contain costs because the rates are averages of provider costs for the program, which larger practices can come in below. The drawback for Medicaid patients is that it artificially restricts access by reducing the appeal of care from solo practitioners and small group practices.

“Medicaid Patients Increasingly Concentrated Among Physicians” is posted at<www.hschange.com/CONTENT/866/#note1>.▪