Trojan Horse or Meaningful Medicaid Reform?

Posted by on June 22, 2012
Medicaid, Medicare

The Centers for Medicare and Medicaid Services (CMS) has outlined its plan to temporarily raise Medicaid rates to Medicare levels for primary care services, and pay states to cover the difference.  On May 11, 2012, CMS issued a proposed rule requiring Medicaid payment for primary care services furnished by eligible physicians at rates “not less than the Medicare rates” for fiscal years 2013 and 2014.[1]  The proposed rule provides for 100% federal matching for any increase in payment above the amounts that would be due under the provisions of a state’s plan as of July 1, 2009.[2]  By increasing Medicaid rates for 2013 and 2014, CMS is implementing certain provisions of the Patient Protection and Affordable Care Act (ACA).  CMS hopes the increased rates will encourage sufficient primary care physician participation in the Medicaid program to accommodate the nearly 16 million new patients that will be eligible to receive Medicaid benefits if the ACA survives the Supreme Court’s review.  The proposed rule does not say, however, what will happen to Medicaid rates – and, more importantly, whether there will be enough physicians to care for the larger Medicaid patient population – after 2014.  Nor does the proposed rule say whether the increased rates for primary care services will be applied regardless of the Supreme Court’s decision.

What physicians are eligible for reimbursement at the higher Medicare rates?

The increased rates apply to physicians with a specialty designation of either family medicine, general internal medicine, or pediatric medicine (primary care physicians).  Significantly, CMS has broadly interpreted the ACA so that subspecialists who provide services sufficiently related to primary care may also be eligible for reimbursement at the higher rates.  CMS suggests that states engage in a two-step process to verify a physician’s eligibility to receive payment for Medicaid services at the higher Medicare rates.  First, a state’s Medicaid agency should establish a system to collect physicians’ “self-attestations.”  Self-attestation requires a physician to identify his or her particular specialty (for instance, pediatrics), or subspecialty (for instance, pediatric cardiology) entitling him or her to the increased rates.  Second, the state must then confirm the physician’s self-attestation by either verifying that the physician is Board certified in an eligible specialty or subspecialty, or reviewing the physician’s billing history for 2012.  Where a state chooses the latter method of confirming the self-attestation, the proposed rule suggests that “at least 60 percent of the codes billed by the physician must be for [codes] specified in the [final] regulation.”  After it determines that a physician is eligible to receive the increased rates, a state must then compensate the physician at the higher Medicare rate prior to seeking reimbursement from the Federal government for the difference.

What services are eligible for reimbursement at the higher Medicare rate?

Under the proposed rule, services described by Healthcare Common Procedure Coding System (HCPCS) E&M Codes 99201-99499 and various vaccine administration codes, or their successors, would be among those eligible for the higher payments.  Some of these codes cover services that are not currently reimbursable under the Medicare program.  Accordingly, CMS plans to issue fee schedules in early 2013 and 2014 for the Medicaid billing codes without a Medicare counterpart.  In other words, the proposed rule would cover all Medicaid services provided by an eligible primary care provider or qualified subspecialist, not only the Medicaid services with a Medicare equivalent.  The preamble to the proposed rule clarifies the need for the additional fee schedule, stating that “[CMS] believe[s] that non-Medicare covered primary care services should be included because these services represent a core component of services commonly delivered in the Medicaid program.”

How will the program be financed?

Federal Financial Participation (FFP) will reimburse states for the difference between the Medicare and Medicaid rates.  The proposed rule allows states to receive 100% of the difference between the rates for Medicaid primary care services in effect on July 1, 2009 and the Medicare rates in effect in 2013 and 2014 or, if higher, the Medicare rates in effect in 2009.  For dual eligibles, FFP will also be available for the full amount of a state’s cost-sharing contribution that exceeds the amount that would have been paid under the state plan in effect on July 1, 2009.  Under the proposed rule, states must meet three general requirements in order to claim FFP for 100% of the difference.  First, after determining that a physician is eligible for the increased rates, a state must make payments to a physician providing Medicaid services at the appropriate Medicare rate.  Second, the state must document the difference between the 2009 Medicaid rate the state would have paid, and the applicable Medicare rate for the same service.  Finally, a state must develop a method to record and report whether a physician is paid on a FFS or managed care basis.[3]

What happens in 2015?

The increased rates should encourage physician participation in the short term, and they may dissuade some physicians from abandoning the Medicaid program in anticipation of an increased Medicaid patient population if the ACA survives.  It is unclear, however, what will happen to Medicaid’s patient population in 2015 if Medicaid rates regress to pre-proposed rule levels.  For example, would state patient abandonment laws prohibit a physician from dropping a Medicaid patient if rates decrease at that time?  Or could physicians simply stop treating a Medicaid patient if the rates become less favorable?  To the extent that state patient abandonment laws would prevent physicians from dropping patients, some would argue that the proposed rule is something of a Trojan Horse; after the proposed rule has facilitated an ongoing financially viable Medicaid-patient-physician relationship, if Medicaid rates drop to pre-ACA levels, physicians would be prevented from discontinuing care, despite the financial burden.  This places the ACA’s newly expanded Medicaid patient population in an especially precarious position as physicians may be unwilling to treat patients who, one day, may be financial burdens.

Assuming the ACA survives the Supreme Court’s review (or at least the portions of the ACA that increase Medicaid eligibility survive the Court’s review), CMS will need to find some way to finance primary care services for the expanded Medicaid population after 2014.  If increasing the Medicaid rates for primary care services is not a sustainable incentive to attract physicians to treat the swelling Medicaid population, CMS must find other means to ensure that Medicaid patients receive the care and access envisaged by the ACA.  Stay tuned…


[1] Medicaid Program; Payments for Services Furnished by Certain Primary Care Physicians and Charges for Vaccine Administration Under the Vaccines for Children Program, 77 Fed. Reg. 27671 (May 11, 2012).

[2] The proposed rule also updates the interim regional maximum fees a provider may charge for the administration of vaccines under the Vaccines for Children Program.

[3] The proposed rule also requires states with Medicaid managed care plans to pay primary care physicians and related specialists at the applicable Medicare rates.  CMS plans to review managed care contracts to ensure they provide for payment at the minimum Medicare primary care levels.

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