Why Medical Insurance Does Not Equal Medical Care

About three-quarters of the expansion in health insurance coverage under the Affordable Care Act is attributable to people newly covered by Medicaid, the federal and state-funded healthcare insurance for the poor and the very young that now insures more than 70 million people. Yet for many, Medicaid has proved to be coverage in name only because recipients can’t find physicians willing to accept their insurance. A new article in the Journal of the American College of Surgeons explains why.

The article compared Medicaid payments with Medicare payments for the most frequently billed surgical procedures. Medicare payment rates are set by the federal government and are relatively uniform across the country with minor adjustments for differing costs in different geographic areas. Medicaid rates, in contrast, are set by each state. The authors report wide variations in Medicaid payments among states for the same procedures with most states paying far less than Medicare for common, essential procedures.

How much less? New Jersey pays 75 percent less for a small bowel resection. Rhode Island pays 93 percent less for excising an axillary (armpit) lymph node. Connecticut pays 69 percent less for removal of a breast mass. Only 13 of the 48 states studied paid more than Medicare for the 13 procedures studied with Alaska and North Dakota showing the largest premiums.

Payments for surgical services include payment for the surgical procedure and for 90 days of post-operative care. An operation like a small bowel resection – removing a piece of intestine and putting the ends back together – usually takes two hours or more. The patient generally remains in the hospital at least five days during which time they must be seen daily and they must also be seen for outpatient follow-up.

In New Jersey, Medicare pays $1,343.16 for a small bowel resection including the inpatient and outpatient visits. New Jersey Medicaid pays only $332.00. Payment isn’t much better in New Hampshire ($400) or Missouri ($459.07).

Surgeons – who have devoted four years post-college to medical school (where they accumulated large student debt) and an additional minimum of five years of surgical training before being certified to practice – feel Medicare payments are barely adequate. Not surprisingly, they are not anxious to perform surgery for Medicaid patients where payments are substantially less.

But it isn’t just specialists like surgeons who are subjected to big Medicaid discounts. The Kaiser Family Foundation reports that states pay physicians an average of 66 percent of Medicare fees for all services. In 46 of the 49 states studied, the Medicaid programs paid less than Medicare – with Rhode Island (73 percent less) and New Jersey (55 percent less) the cheapskate champs.

Remarkably, the figures are even worse for primary care physicians who are regarded as the key points of access into the healthcare system. Nationwide Medicaid payments are only 59 percent of Medicare payments for primary care services with nearly all states paying much less than Medicare for primary care when compared to all services. And who are the worst? Rhode Island (33 percent), New York (42 percent) and California (43 percent) pay the lowest percentage of Medicare fees. Only two states pay more than Medicare for primary care – Alaska (124 percent) and North Dakota (135 percent).

As a CDC researcher documented in a 2012 Health Affairs article, low Medicaid reimbursement rates mean low physician acceptance of Medicaid patients and poor access to care. Increasing the ratio between Medicaid and Medicare fees would increase physician acceptance rates.

The Equal Access Provision of the federal Medicaid law requires states to offer provider payments that “are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”

Clearly this requirement is widely ignored. But there is little chance this will be remedied soon. Medicaid spending already accounts for a large part of state budgets and financially strapped states are unwilling to spend more. And in the absence of action from the federal government which has not been forthcoming, they cannot be forced to spend more – this past year the U.S. Supreme Court in Armstrong v. Exceptional Child Center Inc. ruled that private actors including Medicaid providers do not have the right to sue under either the U.S. Constitution or the Medicaid Act to enforce section the Equal Access Provision.

The ACA coverage expansion will be meaningless unless Medicaid payment rates are increased to at least Medicare levels. As noted, this is unlikely to happen. Giving the poor tax credits and subsidies so they can choose insurance with adequate payments and physician participation would go a long way toward providing the Medicaid population with insurance that actually affords access to care.

Joel Zinberg, a visiting scholar at the American Enterprise Institute, is a practicing surgeon at Mount Sinai Hospital and an associate clinical professor of surgery at the Icahn School of Medicine. He wrote this for InsideSources.com.