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Medicaid crisis socks doctors

Low reimbursement could force some physicians to drop Medicaid patients.

By Joel B. Finkelstein, amednews staff. May 12, 2003.

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Washington -- As financially squeezed state governments look for further Medicaid cuts, physicians across the country are warning of grave consequences for patient care.

"Proposed cuts are causing a great deal of anxiety among physicians," said Helen Kent Davis, director of governmental affairs for the Texas Medical Assn.

Texas' House of Representatives has proposed slashing $3 billion from the Medicaid program, including eliminating coverage for a half-million Texans and reducing payment rates to physicians and others by 5%.

Currently about 89% of Texas family physicians accept Medicaid patients, but that number would drop to 59% if the cuts go into effect, according to a survey by the Texas Academy of Family Physicians.

A recent study conducted for the TMA showed that every dollar trimmed from the state's Medicaid program means an additional 53 cents in uncompensated care provided by physicians and others. A dollar less in Medicaid money also equals $1.34 more in health insurance premiums and $2.81 less in federal funds.

Illinois is also in trouble. While Gov. Rod Blagojevich is looking for ways to avoid making any more Medicaid cuts, the program is struggling with a six-month backlog in reimbursement to physicians and others.

There has always been a wax and wane in the reimbursement cycle, said William Kobler, MD, president of the Illinois State Medical Society. But recently payments to physicians have fallen further and further behind.

Physician groups worry that the populations most affected by the cuts are also the most vulnerable -- patients with physical and mental disabilities who have difficulty getting private coverage.

More than half of the public money spent on mental health services comes from Medicaid, said Paul Appelbaum, MD, president of the American Psychiatric Assn. and a professor at the University of Massachusetts Medical School. Massachusetts recently cut 50,000 people from its Medicaid rolls, and many more have lost prescription drug benefits.

"There is no outpatient safety net anymore. It used to be that community mental health centers were funded by the state to provide services to just this kind of population, people with no insurance coverage," he said. "Those contracts were ended, and they were moved over to a strictly fee-for-service basis under Medicaid. If you don't have Medicaid, they can't take care of you."

As states prepare to make another round of cuts to their Medicaid programs, physicians are faced with the difficult choice of whether to keep serving this population, possibly to the detriment of their practices.

Medicaid already pays the lowest rates, reimbursing physicians half of what private health insurers do and two-thirds of Medicare's rates in many states. The reimbursement is also below what it costs practices to actually provide covered services. The more payment rates drop, the more difficult it is for physicians to make up their losses elsewhere.

Nobody can predict when the altruism of the medical community will reach its limit, said J. Edward Hill, MD, chair of the American Medical Association.

Many people think we are close to that point now, he said. "The last thing we, as physicians, want to do is to stop seeing patients who need our services." But physicians may have little choice if they want to stay in business.

Even if primary care physicians can stick out the low reimbursement for a while longer, they will face other difficulties in ensuring good care for their Medicaid patients. As new cuts go into effect, they will confront not only shrinking pools of specialists for referrals, but also reduced drug benefits for patients.

At the same time physicians are leaving the programs, the mandatory population of Medicaid-eligible patients is exploding, putting more pressure on the doctors who remain.

On the other hand, states are dropping Medicaid patients they aren't required to cover. An analysis by the Center on Budget and Policy Priorities estimates that 1.7 million people will lose their Medicaid coverage this year due to state changes in eligibility criteria. These patients are expected to flood already overburdened emergency departments, costing the health system even more money overall.

"There are a lot of folks downstream who are going to have to pay for the care of these people who are dropped from Medicaid," said Tom Banning, director of legislative and public affairs for the Texas Academy of Family Physicians. "But those may be hidden costs that are spread throughout the health care system and don't show up immediately as a cost to the state treasury."

The big squeeze

Like other states facing similar money woes, Illinois, Massachusetts and Texas are hoping to move funds around or borrow against future revenues, such as the tobacco settlement, to help close budget gaps.

The Texas medical community is pushing for a new $1 tax on cigarettes to fend off the proposed Medicaid cuts. "There really isn't much more to squeeze out of [the program]," said the TMA's Davis.

Despite the deep cuts they have already made, the states are still expecting budget shortfalls to increase this year and next.

Entering 2003, states faced a combined $50 billion budget shortfall, but that could rise by another $26 billion, according to the National Conference of State Legislatures. Next year's deficits are projected to run between $70 billion and $85 billion.

Because the federal government kicks in matching funds for Medicaid, states historically have been loath to cut their programs and lose those extra dollars. Faced with unremitting deficits and growing Medicaid populations, however, state officials say they have little choice.

During the past three years, as budget deficits loomed, state legislatures have sought cost savings, initially by reducing payments to physicians and others and controlling drug spending, and later by trimming covered services and eligible populations.

While some states are looking at cutting payment rates even further, more are adopting eligibility changes that drop tens of thousands of people from their programs. Some are also putting further restrictions on prescription drug benefits or eliminating them altogether.

But these solutions may not be enough, even in the short term, prompting calls for the federal government to step in with additional funds.

"The federal government is really the only player that has the resources right now," Banning said.

Some members of Congress would like to help the states, but that may be an uphill battle. The Bush administration has opposed any additional funds not tied to comprehensive reform.

"In total, what we are going to see is Medicaid not meeting the needs of the population it was meant to serve," said Vikki Wachino, associate director of the Kaiser Commission on Medicaid and the Uninsured.

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