The ACA and Response in Medicaid Reimbursement Rates

Introduction

Social welfare nets in the United States are a large topic of discussion among politicians and those interested in legislation, but two of the most prominent are Medicaid and Medicare, which account for more than a trillion dollars in U.S. spending. Spending on healthcare constitutes 17.5% of GDP, and Medicare and Medicaid accounts for about 40% of that (Bowling et al. 169). Healthcare is very important in regards to the financial and economic markets in America, and we tend to pride ourselves on having the best medical universities and institutions in the world. But there lie inefficiencies within this system, more specifically dealing with Medicaid reimbursement rates. Reimbursement rates are amounts paid to the physician by insurance after care is delivered to the patient. However, ...Medicaid programs paid doctors just 66 percent of Medicare payments for the same services on average across states. (Alexander and Schnell, 1) Because of this low rate, providers have been less willing deliver care to new Medicaid patients. C.J. Bradbury argues this in her article in which ...69 % of doctors nationwide in 2011 accepted new Medicaid patients (248). There has been a significant decrease in acceptance rates from 2004 when providers accepted 79% of new Medicaid patients. To combat this issue, in 2010 the Affordable Care Act (ACA) was passed, which provided a Medicaid expansion and federally mandated a fee boost in 2013 and 2014, raising the reimbursement rates to the levels of Medicare. The discussion brought forth in this paper will be to inform how this fee boost affected primary care physicians, their institutions, and how the ACA impacted the health of those on Medicaid.

The Affordable Care Act and Medicaid

The ACA, more widely known as Obamacare, was a controversial law passed by the Obama administration that consisted of extensive changes to healthcare and health insurance. The premise of the ACA was to increase healthcare services to more Americans. One major change in the insurance industry was concerned with anyone having pre-existing health problems could not be denied from being insured. Nicole Galan from Medical News Today expounds on this idea, explaining as of 2018, health insurers cannot deny or cancel coverage for someone with a pre-existing condition. The insurance must also cover that condition, and insurers cannot charge someone more for having that condition. More provisions, like a fee penalty for not being covered, was introduced, but later removed from the law. 63 new preventive care options were added as a requirement in 2014 (XenonHealth). Other requirements, starting this year in 2018, such as having to be employed, are another part of the changing health laws (Galan). Many believe that this law is overly structured and complicated to follow, with amendments being made frequently, drastically changing its guidelines.

However, the focus of this paper is on the federal mandate of 2013 and 2014 and its impact on Medicaid, as previously mentioned. This significantly changed Medicaid reimbursement rates when implemented and was effective in increasing new Medicaid acceptance rates.
Those who qualify for Medicaid are well below 100% of the poverty line, representing a demographic of low socioeconomic status and underrepresentation in the community. Relative to the privately insured, Medicaid beneficiaries have lower income and education levels, live in larger families, are less likely to be married, and are more likely to be black and Hispanic (Alexander and Schnell, 10-11). Furthermore, Bullock and Bradford add onto this, taking health into the account, acknowledging ...not only are Medicaid and Medicare average payment lower, but those patients are more likely to require more treatment (and thus more of the physician's time) as a result of the generally lower health state (67). Dealing with underserved members of the community, it was important for government officials to determine whether the Medicaid expansion should be controlled by the states or on a federal level from an efficiency standpoint. Having a state-controlled Medicaid program, each state can evaluate it on a case-by-case basis and increase reimbursement rates to a socially optimal level, which is what was agreed upon in 2010.

Alexander and Schnell combine data from this federal mandate, focusing on patient health and implications associated with the acceptance of new Medicaid patients. The authors find no evidence of crowding out, or spillover, into the private health insurance market when the acceptance rate increases. What worries individuals in the health sector is that an oversupply of patients would lead to increased waiting times and less time spent with the physician, meaning that the quality of care would deteriorate in a primary care setting. This was proven to not be true during 2013 and 2014, when providers were incentivized to work longer hours and increase productivity. Concluded in this section was that Medicaid patients gaining eligibility during this time experience[d] the largest increases in office visits and the largest decreases in reports of fair or poor health. (20) The federal mandate showed significant positive change within the medical field, but should this social expense come out of taxpayer dollars?

Providers

Providers assess whether the patient will be accepted into the facility based on surrounding market conditions, the type of compensation structure that the facility uses, geographic location, and the type of facility offering care. For the case of this paper, primary care physicians will be focused on, who are the center of preventive care in the United States. Primary care physicians are responsible for treating symptoms of various conditions before those conditions worsen, and when patients are not seen (or in this case, denied), they will see a specialist when the situation gets to a life-threatening point. Medicaid patients are those that require treatment the most due to poor standards of living and low socioeconomic status; they also make up a group of individuals that are not accepted by primary care physicians more often than Medicare and privately insured individuals. A major negative externalities to low reimbursement rates, and therefore lower new patient acceptance rates by a primary care physician, are increased health costs when these patients have to see a specialist (Bullock and Bradford, 67).

Bullock and Bradford use data from the Community Tracking Survey to analyze this externality and associate this to market conditions in the supply and demand of physicians and patients. Both authors discuss two opposite ends of market volatility - a highly competitive market vs. a less competitive market:

...consider what should happen if the practice wants to provide more visits than they can find patients for (i.e. very competitive market). In this case, the practice will want to incentivize physicians to attract any patient. Also, physician revenue would be more variable in a pure productivity based compensation scheme. So, not only will large salaried components of compensation be preferred by the physicians, the practice would be more likely to pay physicians based on patient satisfaction or the quality of the care provided. (72)

How physicians are paid changes with market conditions. The competitive market is associated with a quality of care compensation method, and more Medicaid patients are seen as a result of a demand shortage. But a less competitive market is associated with the volume of patients seen. In this type of market scenario, there are more patients available than can be seen, which is why new Medicaid patients are denied more often by primary care physicians. The productivity versus quality of care payments to providers has been a great discussion over recent years.

There have been dramatic results using either type of compensation structure. Quality of care payments, or value-based payments (VBP), are evaluated by scores after care is delivered to patients. This is becoming more commonplace within the health sector as the aforementioned negative externality has been becoming increasingly noticed among health professionals. For example, in 2018, 50% of Medicare payments have to be through using value-based payments instead of the productivity payments. Although this does not mention Medicaid, it can be inferred that there is some direction on using VBPs for Medicaid patients as well. In VBPs, 70% of the score focused on clinical outcomes, and 30% of the score contributed to patient satisfaction, on a scale of 0-10 to induce providers to improve their quality of care. Hospitals could then be granted a 1% increase in reimbursement of the patient's bill if a perfect score was obtained. The effects of changing to VBPs have decreased healthcare costs, hospital readmissions, and improved quality of care in 96% of hospital facilities (Bowling et al. 172).

Other determinants like practice size and economies of scale affect new Medicaid patient acceptance rates. In two different studies, parallel evidence was evaluated, controlling for any other variables. For example, Bradbury states in her abstract that there are certain determinants in which the acceptance of new Medicaid patients is limited by practicing physicians. The author later discusses the data surrounding this argument, supporting it with statistical methods of significance. She represents data only on U.S. office-based physicians, excluding medical facilities such as colleges, hospitals, and health maintenance organizations. Results of this are found, telling of the determinants of low Medicaid acceptance:

The most significant factors found to be associated with diminished physician propensity for Medicaid access include: no present participation, having an ownership interest in the practice, operating as a one- or two-physician sized practice, operating as a primary care physician, low relative geographic physician reimbursement, lacking supportive clinical information technology and gender. (247)
These were the highest associations out of more than twenty coefficients tested (Bradbury, 254). Recent trends in the health sector have shown more and more facilities have been increasing in size as reimbursement rates decrease and administrative costs rise, thus taking advantage of increasing economies of scale in order to spread costs. More importantly, increasing economies of scale aids providers in accepting new Medicaid patients. The spread costs allow for healthcare facilities to increase spending on healthcare information technology [which] enables hospitals, clinics and doctors to share information, which enhances overall efficiency (Bradbury, 249). This reduces moral hazard via agency theory and increases the spread of information. With greater productivity, practices have a greater economic output on the local and surrounding communities.

The Effects of the ACA's Federal Mandate on Patient Health and Well-Being

Fairly substantial evidence has been found regarding Medicaid recipients health, office visits per year, school absenteeism, and nationally reduced health costs.

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