The Affordable Care Act includes two key provisions regarding reimbursement to primary care providers: (a) it provides a 10 percent supplemental payment under the Medicare PCIP program to eligible providers (effective January 1, 2011); and (b) it raises the Medicaid primary care reimbursement rate at least up to 100 percent of the Medicare rate. ASPE has contracted with the Lewin Group to examine the role of Medicare PCIP and supplemental payment programs, including the HPSA and PSA incentives, in increasing the supply of primary care providers (PCP) and the access of patients to their services.
We reviewed the health and labor economics literature to understand the nature and the size of the impact of any financial incentives on the labor supply behavior of PCPs and the resultant impact on the availability of primary care services estimated in the existing body of research. We documented the prior empirical evidence of the impact of financial incentives on raising the supply of primary care workforce, the volume of services, impact on medical graduates’ propensity to participate in primary care, PCPs’ retirement decision, etc. This review also evaluated the past evidence on the effect of bonuses in shortage areas and their effectiveness to redistribute and retain primary care workforce. Finally, the review of the literature also focused on the state-specific experiences with changes in their respective Medicaid payment rates for primary care and the resultant impact on the supply of PCPs, their rate of acceptance of Medicaid patients and the volume of primary care services such as office visits or visits for E&M services.
To explore these topics, we constructed a provider level data set including all the claims submitted by the entire universe of Medicare providers in each year from 2005 to 2011. We linked Provider360 data (available from Lewin Group’s parent company Optum Inc.) and the AMA Physician Master File to add provider characteristics such as demographics (e.g., age, gender), provider designation, medical school and practice location. We also added geographic location specific variables from the Area Resource File (ARF) based on the practice location information of providers.
We find that as a result of the Medicare incentive payment the number of Medicare primary care providers has increased on average annually by about 2.8 providers per county from 2009 to 2011. The number of primary care physicians with PCIP eligible specialty increased by about 10 percent in response to the 10 percent incentive payment under the PCIP policy (i.e., elasticity of the number of primary care physicians with respect to the incentive payment is about 1). Eligible claims for some types of PCIP eligible E&M services and associated allowed charges have also increased. For example, on average, there was a 7 percent increase in the number of 25 minute office visits claims due to the PCIP policy. On the other hand, in response to the PCIP policy, there was a 9.3 percent increase in the average allowed charges (for the eligible services) among primary care provider with PCIP eligible specialties. Our results regarding the PCIP impact should be interpreted with caution due to several reasons. First, we only observe one year after the PCIP was in effect and as data becomes available for the full 2011-2015 period, the magnitude and precision of our estimates may change. Second, given the limited timeframe of this incentive, providers may not be willing to make long-lasting adjustments in their decision to supply primary care services. Finally, as Medicare providers become more familiar PCIP users in time and adjust their behavior, the full impact of the incentive on provider behavior may change.
In addition, we find that Medicare providers were attracted to PSA areas through the PSA bonus, and submitted 7.8 percent more E&M claims annually during the PSA period. Gaining HPSA status also generated an additional 17 E&M claims submitted by primary care physicians with HPSA bonus-eligible specialties. Estimation of HPSA and PSA bonuses impact on primary care supply has been hindered by the existence of biases rising from the fact that the HPSA and PSA designation is a function of the current supply of providers. While we try to mitigate some of these sources of bias, future research is needed to provide a causal estimate of these bonuses.
Finally, we document the variation in Medicaid reimbursement rates relative to the Medicare rates, both for primary care and for all services, across US states during the period 2008-2012, using the existing body of evidence. Using the empirical results from our PCIP analysis, we also perform an exercise to simulate the effect of a 10 percent increase in the Medicaid-to-Medicare fee index on the proportion of US office-based physicians accepting new Medicaid patients across all states. The simulation suggests that a 10 percent increase in Medicaid-to-Medicare fee ratio would increase the US average of office-based primary care physicians accepting new Medicaid patients from 66.2 to 72.8 percent. We caution against using the estimated impact of PCIP program to extrapolate the impact of Medicaid-to-Medicare parity. This is because (1) in general parity would require a much bigger change in Medicaid-to-Medicare fee ratio (compared to the 10 percent PCIP payment); and (2) our PCIP analysis is limited in the sense that it is not capturing continuous variation in the incentive payment due to the nature of the program.