Physician Reimbursement Under Medicaid

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778 PEDIATRICS Vol. 89 No. 4 April 1992

Physician

Reimbursement

Under

Medicaid

Physician payment under Medicaid has been a

cause of growing concern among physicians because

of the bow bevels of reimbursement in relation to

private payors and the Medicare program in many

states. This is particularly important to physicians caring for children because of the growing

depend-ence of poor children on Medicaid and the evolution

of Medicaid policies since the mid 1980s.

Beginning in the mid 1980s Congress began begis-bating a series of laws that expanded Medicaid eligi-biity for poor and near poor children. This series of legislation culminated with the Omnibus Budget Rec-onciliation Acts of 1989 and 1990. These acts required all states to establish minimum Medicaid income eli-gibility thresholds at 133% of the federal poverty

level for children less than 6 years of age and then

subsequently to phase-in coverage, 1 year at a time, for all children through 1 8 years of age with family

incomes less than 100% of poverty bevel. With a

growing population of poor children in the US, these changes could not have come at a more opportune

time. Between 1979 and 1987, there was a 29%

increase in the proportion of children living below

the poverty line and, if current trends continue, one

in every four children will live in an impoverished family by the year 2000.’

These Medicaid expansions hold the promise of

improving access to health care for millions of poor children. But whether this promise can be fulfified

remains in some doubt. With some three million

additional children expected to gain Medicaid

eligi-biity by the year 2000, meeting their needs will

require a significant added commitment on the part of pediatricians and other health professionals. Al-though pediatricians are often viewed by public offi-cials as more altruistic than other physicians in their willingness to serve bow income patients, the number

Of pediatricians willing and able to take care of

Med-icaid patients appears to be declining. A report by the

American Academy of Pediatrics found that the

pro-portion of Academy Fellows who saw no Medicaid

patients increased from 15% in 1978 to 23% in 1989.

Similarly, the proportion who limited the size of their

Medicaid practices increased from 26% to 39% during the same period.2

Although a number of factors affect pediatricians’ decisions to participate in state Medicaid programs,

fee levels rank at the top of the list. A 1990 survey

by the Physician Payment Review Commission

(PPRC) and the National Governors’ Association

(NGA) of state maternal and child health agencies

revealed that inadequate payment levels was the

bead-ing reason cited for nonparticipation of pediatricians

Received for publication Feb 5, 1992; accepted Feb 5, 1992.

Reprint requests to (P.R.L.) UCSF Institute for Health Policy Studies, 1388 Sutter St, 11th floor, San Francisco, CA 94109.

PEDIATRICS (ISSN 0031 4005). Copyright C 1992 by the American Acad-erny of Pediatrics.

in Medicaid programs.”3 That Medicaid fees are gen-erally well below Medicare and private payor fees has

been well documented. The PPRC/NGA survey

found that Medicaid fees for a variety of common

physician services averaged only 69% of Medicare

prevailing charges for the same services. Medicaid fees represent an even smaller proportion of private

fees. For example, the PPRC/NGA survey reported

that Medicaid physician fees for a tonsillectomy and

adenoidectomy averaged only 37% of charges

sub-mitted to private insurers. Finally, states have been

slow to implement fee increases, thus eroding the

value of Medicaid provider payments. McManus and

colleagues reported that one in every four states had not raised their fees for office-based pediatric care in the 5 years prior to their 1989 survey.4

Alarmed by these findings, policy makers have

become increasingly interested in using fee increases to address the needs of Medicaid beneficiaries and providers alike. Two congressional actions are

note-worthy in this regard. First, the Omnibus Budget

Reconciliation Act of 1989 requires states to demon-strate annually that their fees are sufficient to ensure that Medicaid-enrolled children have access to pedi-attic services comparable with that of children in the

general population. Second, Congress mandated the

PPRC to study physician payment under Medicaid

and to consider the adequacy of physician fees, phy-sician participation, and beneficiary access to care.

In the context of this renewed interest in addressing

reimbursement problems under Medicaid, the report

by Davidson and colleagues in this issue is particu-larly timely.5 Davidson and his coauthors evaluated an increase in Medicaid fees and a change in payment

mechanisms in Suffolk County, New York between

1983 and 1985. In this demonstration project,

office-based physicians caring for substantial numbers of

Medicaid-enrolled children were assigned to

experi-mental and comparison groups. Some of the

physi-cians in the experimental group were prepaid for their services and others received a fee for each service. In

either case physicians in the experimental group

re-ceived substantially higher Medicaid payments in

ex-change for an obligation to manage the care of their

patients. Those in the comparison group continued to

receive New York’s standard levels of Medicaid reim-bursement.

Findings from the evaluation support the notion that financial incentives influence physician and

pa-tient behaviors in predictable ways. Although the

demonstration project did not permit a direct test of

fees on physician participation in Medicaid, it did

show that many physicians will continue to take

Medicaid patients, even when placed at financial risk, so bong as the compensation they receive is compa-rable with that provided in the private marketplace. The study results also suggest that access to

office-based physician services may be increased for

pedi-atric Medicaid enrollees when reimbursement levels

are raised to market rates through fee-for-service or

prepayment.

It is important to note, however, that differences in pediatric utilization of office-based physician services

for the experimental and comparison groups in the

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COMMENTARIES 779

Davidson study were modest despite a near doubling

in payment bevels for physicians in the experimental group. This result is consistent with past studies on

the relationship between Medicaid fees and access to

care.69 In these studies, Medicaid fees appear to have little or no effect on the proportion of Medicaid beneficiaries receiving services, the number of serv-ices received, or the probability of contact with a physician. The most recent of these studies evaluated

the effects of a 1988 fee hike in Maine’s Medicaid

program. Fees for office visits were raised an average of 60%; and during the subsequent 12 months, utili-zation of physician services increased by only 10%. Services used exclusively by children showed mixed

effects; EPSDT visits for new patients increased 8%

but decreased 2% for established patients.9

Although raising Medicaid fees may have only

modest effects on the volume of services used by

child beneficiaries, there are a number of other justi-fications for raising fees. First, previous studies have demonstrated that Medicaid fee bevels are associated

with the site in which services are received. Two

recent studies, including the article by Davidson

et al in this issue, demonstrate that Medicaid en-rollees are more likely to receive their care in office settings rather than hospital emergency departments

or hospital outpatient departments when fees are

increased.5’9 Care delivered in the latter settings is

substantially more expensive, particularly for

chil-dren.7”#{176}Second, higher fees can result in higher physician participation rates, especially if the gap

between Medicaid and private fees is reduced.3

Higher levels of participation benefit Medicaid

enrol-bees by providing them with greater choice and an

improved likelihood of locating a medical home. Third, when Medicaid fees are set at inadequate 1ev-els, participating physicians are forced to shift their

unreimbursed costs to other payors, notably private

health insurers. But as doctors are increasingly being obligated to accept discounted fees from private man-aged care organizations, their ability to shift costs on behalf of needy children is diminished. Finally, there

is the simple issue of fairness. Inadequate fees are

unfair to both physician and patients. From the

pa-tient’s perspective, bow fees serve to perpetuate a

multitiered system of care where they reside on the

bottom tier. From the physician’s perspective, low

fees foster the image of welfare medicine and may

accelerate the downward trend in provider acceptance of Medicaid patients.

In addition to raising fees, other strategies to

im-prove access for Medicaid enrollees should be

pur-sued. These strategies can be divided into administra-tive remedies and structural reforms. A frequent

com-plaint among physicians is the paper work and time

involved in securing Medicaid reimbursement. The

PPRC/NGA survey of state maternal and child health

agencies reported that administrative problems ranked just after bow payment bevels as a major cause

of pediatrician nonparticipation in Medicaid

pro-grams. Another survey of practicing pediatricians

found that payment delays had a significant negative impact on Medicaid participation rates.11’12

Much can be done to remedy these administrative

difficulties. The PPRC/NGA survey indicated that

many states are moving to reduce billing problems

and speed up reimbursement. For example, 31 states reported implementing electronic claims processing

systems (PPRC, 1991). One model is Georgia’s new

electronic billing and funds transfer program. Under this program, the Medicaid fiscal agent supplies par-ticipating physicians with free computer software and staff training, so that all claims can be handled ebec-tronically. The initial response of providers has been quite positive.1 States are also adopting toll-free hot lines for provider billing questions, developing sim-plified billing forms and provider manuals, and of-feting training sessions for physicians and their sup-port staff.3 The federal government could encourage these efforts further by offering states direct grants or

higher federal Medicaid matching contributions for

development of innovative administrative

mecha-nisms to simplify and speed up claims processing.

In depressed inner cities and other areas (eg, low

income rural areas) with few available providers, structural reforms may be necessary to assure access for poor children. Specifically, programs that help to ameliorate the current maldistribution of physicians

should be fostered and expanded. One approach

would be to increase substantially current budget

commitments for the National Health Service Corps.

The Corps places doctors in rural areas and inner city

neighborhoods where physicians are in short supply.

The Corps’ budget was slashed by the Reagan

Ad-ministration, which predicted in 1981 that the prob-lems of access to basic health care would be ‘virtually eliminated within the next few years due to growth in the nation’s supply of physicians’ (New York Times. January 26, 1992).

Another approach would be to increase funding for

community and migrant health centers which also

were subjected to major funding cuts during the

Reagan years. Recently, Congress enacted legislation

that requires state Medicaid agencies to reimburse

federally qualified community health centers on a

cost basis for services provided to Medicaid enrollees. This should greatly increase funding for those centers

with substantial Medicaid client loads. However,

many community clinics are using the new revenues

to make up for other losses in funding and to provide

care for a growing number of uninsured clients.

Ad-ditional long-term funding increases are needed if

community clinics are to play a major role in improv-ing access for poor children in medically underserved areas.

Pediatric services alone are inadequate to meet the needs of many children, including bow income

chil-dren, who may suffer a range of psychosocial

prob-lems, including teenage pregnancy, drug abuse,

depression and other problems. These children need

the services of psychologists, social workers, and

other counselors. Hence, it is important that Medicaid

coverage and reimbursement rates are adequate for

these practitioners as well. In addition, nurse practi-tioners can often provide services needed by children

in underserved areas, either in combination with

pe-diatricians in a single site or linked to pediatricians

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780 COMMENTARIES

when practicing in remote sites, such as rural areas. Policies are needed to ensure that nurse practitioners are compensated adequately for these services.

Finally, preventive services, including immuniza-tions, are essential to children’s health. Millions of children currently do not receive adequate preventive

services. Whether preventive care is best provided in

the setting of the physician’s office or through an

organized public system designed to provide preven-tion services as in many European countries is a topic for another essay.’3”4

In conclusion, payment for physicians’ services for

poor children is an issue of growing importance

be-cause of the growing number of poor children,

par-ticularly those dependent on Medicaid for access to

care. The payment of physicians by Medicaid at

Med-icare or private rates will increase access to care for

poor children only slightly. Payment hikes may help

shift the site of care from the hospital to the physi-cian’s office and increase participation rates for pe-diatricians, but there are a great many other issues that must be dealt with if poor children are to receive

the services they need. These include structural

re-forms to the health care system that will increase the availability of physicians and other health

profession-als in underserved areas, widening availability of

psychosocial support services, and expanding access

to preventive care.

PHILIP R. LEE, MD Physician Payment Review

Commission

Institute for Health Policy Studies University of California, San Francisco

PAUL W. NEWACHECK, Did’H

Associate Professor of Health Policy Institute for Health Policy Studies University of California, San Francisco

REFERENCES

1. Hill I, Breyel J. Caring for Kids. Strategies for Improving State Child Health Programs. Washington, DC: National Governors’ Association; 1991 2. Yudkowsky B, CartlandJ, Flint S. Pediatrician participation in Medicaid:

1978 to 1989. Pediatrics. 1990;85:567-577

3. Physician Payment Review Commission. Annual Report to Congress 1991. Washington, DC: US Government Printing Office; 1991

4. McManus M, Flint 5, Kelley R. The adequacy of physician reimburse-ment forpediatric care under Medicaid. Pediatrics. 1991;87:909-920 5. Davidson SM, Manheim L, Werner SM, Hohlen MM, Yudkowsky BK,

fleming CV. Prepayment with office-based physicians in publicly funded programs: results from the children’s Medicaid program.

Pedi-atrics.1992;89:761-767

6. Long 5, et at. Reimbursement and access to physician services under Medicaid. JHealth Econ. 1986;5:235-251

7. CohenJ. Medicaid policy and the substitution of hospital outpatient care for physician care. Health Serv Res. 1989;24:33-66

8. Rosenbach M. The impact of Medicaid on physician use by low income children. Am JPublic Health 1989;79:1220-1225.

9. Lambert D, Coburn A, McCuire C. Increasing Medicaid Obstetrical and Primary Care Fees: The Effects of Utilized and Physician Participation.

Center for Health Policy, University of Southern Maine; 1991 10. fleming N,Jones H. The impact of outpatient department and emergency

room use on costs in the Texas Medicaid program. Med Care.

1983;21:892-910

11. Perloff J, Kletke P, Neckerman K. Recent trends in pediatrician partici-pation in Medicaid. Med Care. 1986;24:749-759

12. PerloffJ, Kletke P. Neckerman K. Physicians decisions to limit Medicaid participation: determinants and policy implications. IHealth Polit Policy Law. 1987;12:221-235

13. Williams B, Miller C. Preventive Health Care for Young Children: Findings from a 10-County Study and Directions for United States Policy. Pediatrics.

May 1992 Supplement. In press.

14. Silver C. Child Health: America’s Future. Germantown, MD: Aspen Systems Corporation 1978

WILL BOTH SIDES OF THE ABORTION DEBATE AGREE ON SOMETHING? PLEASE!

Neither [the anti-abortion nor the pro-choice] side’s moral claims are without

flaws. Both may agree that dangers lurk in government usurpation of natural

processes, that mothers are often the safest guardians of their young, and that the

unborn deserve our care. And both may agree, too, that sex as a servant of love

should triumph over sex as a tool of power.

Tribe LH. Abortion: The Clash ofAbsolutes. New York: WW Norton; 1990.

Submitted by Student

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1992;89;778

Pediatrics

PHILIP R. LEE and PAUL W. NEWACHECK