Health Practitioner Bonuses and Their Impact on the Availability and Utilization of Primary Care Services. 1. Systemic Change in Medicaid Reimbursement Rates in All States


Systemic Medicaid changes have the potential to alter the primary care environment across all states. Cunningham (2011) considers a regression-based approach to identify the causal effect of increases in Medicaid reimbursement rates relative to the Medicare rate on the propensity of primary care physicians accepting new Medicaid patients. He reported, prior to the 2012 Supreme Court decision (National Federation of Independent Business et al. vs Sebelius et al.27), that once the ACA is implemented Medicaid eligibility will expand to cover as many as 16 million more poor and low-income adults by 2019 (an increase of more than 25 percent). To meet the resultant surge in demand for primary care services, ACA provides financial incentives to encourage higher participation of primary care physicians in Medicaid. Specifically, the ACA raises the Medicaid reimbursement rates for certain services provided by primary care physicians up to 100 percent of Medicare rates in 2013 and 2014. This study uses primary care physicians from the HSC 2008 Health Tracking Physician Survey and exploits the existing state level variation in Medicaid reimbursement rates (as a percentage of the Medicare rate). The author groups the states in three categories (low, medium and high) based on PCPs to population ratios.

This study shows that in 2008 the average Medicaid reimbursement rate for low-PCP states was about 81.6 percent of the Medicare rate; while for medium and high-PCP states the average rates were 64.3 percent and 54.8 percent, respectively. The national average of the Medicaid reimbursement rate was 66.2 percent of the Medicare rate. Cunningham (2011) examines the effects of Medicaid reimbursement rates on PCP acceptance of Medicaid patients, while accounting for differences in phy­sician practice, patient and health care market characteristics. The results show that higher Medicaid reimbursement rates are associated with a greater probability of PCPs accepting all or most new Medicaid patients, although the effects are relatively modest. For PCPs, a 10-percentage point increase in the Medicaid/Medicare fee ratio for primary care is associated with only a 2.1-percentage-point increase in PCP Medicaid patient acceptance. The study reports that the national average Medicaid reimbursement rate relative Medicare in 2008 was at 66.2 percent and the national average acceptance rate of new Medicaid patients by PCPs was 41.5 percent. Therefore, the implied elasticity of accepting primary care patients with respect to the payment rate is about 0.33.28 In other words, if the Medicaid fee relative to the Medicare rate goes up by 10 percent then the acceptance of new Medicaid patients by PCPs goes up by 3.3 percent. Excluding pediatricians, the effect of reimbursement on Medicaid acceptance is slightly higher: the implied elasticity of accepting primary care patients with respect to the payment rate is about 0.41. In the context of the parity in Medicaid and Medicare reimbursement rate under the ACA, empirical findings by Cunningham (2011) can serve as a benchmark for the likely positive effect of higher Medicaid reimbursement rates on the access to primary care services.

Other studies bolster this finding. Shen and Zuckerman (2005) study the effects of Medicaid payment generosity on access and care for adult and child Medicaid beneficiaries. The authors use data comparing the experiences of Medicaid beneficiaries with groups that should not be affected by Medicaid payment policies (the uninsured) using a difference-in-differences model. Shen and Zuckerman (2005) find that higher payments do increase the probability of having a usual source of care and the probability of having at least one visit to a doctor or other health professional. Specifically, they find that a one unit increase (equivalent to a 10 percent increase) in the payment generosity index29 leads to a 1.5 percentage point increase in the probability of having a usual source of care and a 1.6 percentage point increase in having at least one visit to a health professional.30 Importantly, payment generosity was noted to have no effect on the probability of receiving preventive care or the probability of having unmet needs. The authors argue that this weak association between increased payments and utilization of services is due to the higher correlation between payment increases and participation by physicians, with a secondary effect on utilization.

27 U.S. Supreme Court’s decision in the case challenging the constitutionality of the Affordable Care Act (ACA:

28 Implied Elasticity is (2.1/41.5)/(10/66.2) or 0.33. After excluding Pediatricians the acceptance rate of Medicaid patients among PCPs is about 38.5 percent and a 10-percentage point increase in the Medicaid/Medicare fee ratio for primary care is associated with only a 2.4-percentage-point increase in PCP Medicaid patient acceptance. Therefore, the implied elasticity is (2.4/38.5)/(10/66.2) or 0.41.

29 The Medicare payment generosity index is defined as the Medicare capitation rate in a county divided by the median Medicare capitation rate in the nation in a given year. Average is defined to be 10.

30 These can be interpreted as elasticities. Implied elasticity would be 0.15 and 0.16 respectively.

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