The availability of primary care is particularly important for public payer programs, such as Medicaid and Medicare. Historically Medicaid has been the less generous payer for primary care services relative to Medicare, paying just 66 percent of Medicare rates on average.53 In this section we first describe the variation in Medicaid reimbursement rates relative to those for Medicare, both for primary care and for all services, across US states during the period 2008-2012; and second 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.
Cunningham et al. (2011) report that fewer physicians accept new Medicaid patients in response to the low Medicaid reimbursement rates in several states. Decker (2012) used data on office-based physicians from the 2011 National Ambulatory Medical Care Survey Electronic Medical Records Supplement to summarize the percentage of physicians currently accepting any new patients. She finds that 69.4 percent of physicians in the sample accepted new patients with Medicaid. This was lower than the percentage accepting new self-pay (91.7 percent), Medicare (83.0 percent), or privately insured patients (81.7 percent). Logit regression model estimates showed that raising Medicaid fees to Medicare levels for all physicians, a 25.8 percentage-point (35 percent) increase in the current average ratio of 74.2, would increase the acceptance rate of new Medicaid patients by 8.6 percentage points (12 percent) - from an average of 69.4 percent across physicians to an average of 78.6 percent.
Zuckerman et al. (2009) reported that in 2008 state-level average primary care physician fees under Medicaid ranged from 57 percent of the national average Medicaid fees in Rhode Island to 226 percent of national average in Alaska. They also found that after strong Medicaid fee growth during 1998-2003, Medicaid fees fell relative to inflation during 2003-2008. Despite the slowdown in overall fee growth, Medicaid fees for primary care services kept pace with inflation. The ACA increases Medicaid reimbursement rates for certain services provided by primary care physicians to 100 percent of Medicare rates in 2013 and 2014. Given the variability of Medicaid payments across states, this could be a substantial boost in payments for physicians in some states and less so in others.
Zuckerman et al (2009, 2012) provided state-level Medicaid-to-Medicare fee indices for 2008 and 2012. These studies show that the national average Medicaid reimbursement rate for primary care services declined from 66 percent of the Medicare rate in 2008 to 59 percent in 2012 (about 10.6 percent decline). However, the national average Medicaid-to-Medicare fee index for all services declined by about 8.3 percent (from 72 percent in 2008 to 66 percent in 2012) during the same period.
Exhibit 24 reveals wide state-to-state variation in the Medicaid fee relative to the Medicare rate in both 2008 and 2012. In several states, including California, Florida, Michigan, New York and Rhode Island, the Medicaid primary care fee in 2012 was less than 50 percent of the Medicare rate. In several other states, including Alaska, Delaware, Montana, North Dakota, Oklahoma and Wyoming, the Medicaid primary care fee was above 90 percent of the Medicare rate in the same year.
There is substantial variation in the percentage change in the Medicaid-to-Medicare fee index across these states, too. During 2008-2012 most of the states, except Maine, Mississippi, New Jersey, New York, North Dakota and DC, experienced a decline in the Medicaid-to-Medicare fee index for all services and for primary care services. Another exception is Minnesota where the Medicaid-to-Medicare fee index for all services declined by 6.6 percent during the same period, but the index for primary care services increased by about 25.9 percent. In Arizona, Georgia, Louisiana, Michigan, Nevada, Virginia and Wyoming the decline in Medicaid-to-Medicare fee index for primary care is more than 15 percent.
Decker (2012) and Cunningham (2011) exploit the state-level variation in the Medicaid reimbursement rates and they examine the impact of an increase in Medicaid fee relative to Medicare on physicians’ propensity to accept Medicaid patients.
Cunningham (2011) uses 2008 Health Tracking Physician Survey on 1,748 primary care physicians (PCPs). The empirical analysis includes the estimation of a linear probability regression model of whether a PCP is accepting new Medicaid patients using the state-level Medicaid reimbursement rate relative to Medicare rate as one of the independent variables. The key findings of this study can be summarized as follows:
Average Medicaid-to-Medicare fee ratio for primary care in 2008 was 66.2 percent.
On average PCPs accepting all or new Medicaid patients in the US in 2008 was 41.5 percent.
One percentage point increase in Medicaid-to-Medicare fee ratio increases the proportion of PCPs accepting Medicaid patients by 0.214.
Thus, based on the findings in Cunningham (2011) the implied elasticity of accepting primary care patients with respect to the Medicaid-to-Medicare fee is about 0.34.54 In other words, a 10 percent increase in the Medicaid fee relative to Medicare across all states would imply an increase in the acceptance rate of Medicaid patients from 41.5 percent to 42.9 percent nationally. The estimated elasticity also suggests that under Medicaid-Medicare payment parity the national average acceptance rate would go up from 41.5 percent to 48.7 percent.55
The analytical findings presented here can be improved further if the data on proportion of physicians accepting new Medicaid patients in 2012 are available for each state. Similarly, availability of the state-level Medicaid-to-Medicare fee index in 2011 can also refine the simulation results.
Exhibit 24: Medicaid-to-Medicare Fee Index
Source: Zuckerman et al (2009 and 2012); data on Tennessee were not available.
Decker (2012) used data from the 2011 National Ambulatory Medical Care Survey Electronic Medical Records Supplement of 3,979 office-based physicians (PCPs and non-PCPs). The study’s empirical analysis included estimation of a logit regression model of whether an office-based physician is accepting new Medicaid patients. A key variable in this analysis was the state-level Medicaid-to-Medicare fee index of 200856. The key findings of this analysis were:
Average Medicaid-to-Medicare fee ratio for all services (2008) was 72 percent.
The average office-based physician new Medicaid patient acceptance rate for 2011 was 69.4 percent.
Among PCPs the acceptance rate was 66.2 percent; among non-PCPs the acceptance rate was 71.7 percent.
Based on the logit parameter estimates, she finds that an increase in the fee ratio from 74.2 to 100 would be expected to increase acceptance of new Medicaid patients from 69.4 percent to 78.6 percent.
In other words, a 10 percent increase in Medicaid-to-Medicare fee index for all services across all states would suggest a rise in the acceptance rate from 69.4 percent to 72.3 percent nationally.57 Thus, the implied elasticity of office-based physicians accepting new Medicaid patients with respect to the Medicaid-to-Medicare fee is about 0.43.58 The study also finds that, holding other things constant, primary care office-based physicians are about 7.3 percentage point less likely to accept new Medicaid patients. Decker also estimated the impact on the primary care physicians only and she found that the estimated impact is similar to the one reported above for all physicians. More specifically, she found that an increase in the Medicaid-to-Medicare fee ratio for primary care to 100 was predicted to increase acceptance of new Medicaid patients among primary care physicians from 64.7 percent to 71.7 percent.