Lamon Willis
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On July 30, 1965, President Johnson signed the Social Security Amendments which established Medicare and Medicaid, promising that they would “improve a wide range of health and medical services for Americans of all ages.” Medicaid was designed as a welfare program to provide healthcare services to vulnerable, low-income groups. Medicaid is jointly financed by federal and state governments. The program is now 50 years old, giving us plenty of time to reflect on where we’ve gone wrong.
1. Medicaid Funding for Healthcare Providers
Because the program is supposed to improve access to health and medical services, we should see marked improvement in this area. However, the court case Armstrong v. Exceptional Child Center buried any illusion that Medicaid Expansion will improve access to healthcare. In a 5-4 decision, the U.S. Supreme Court barred doctors, dentists and pharmacists from suing states for allegedly curtailing reimbursements for care they provide to Medicaid patients. Although the ruling doesn’t directly impact Medicaid’s promise to provide quality care for the poor, fulfilling that promise requires a wide and accessible network of physicians. By this metric, Medicaid hasn’t fulfilled its pledge for years and the Supreme Court made it official.
With a bloated and ever growing-budget, this government program has consistently displayed an inability to provide quality healthcare. And, in spite of its failing record, many state legislators continue annual attempts to expand Medicaid year after year. An excellent example of this is the court case of Armstrong versus Exceptional Child Center in the state of Idaho. In this case, the plaintiffs alleged that the state of Idaho violated its pledge to provide Medicaid in a manner which:
“assure[s] that payments are consistent with efficiency, economy and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan.”
In 2005, the Idaho state legislature passed a law that increased Medicaid’s reimbursement rate for physicians, however, the state lacked the finances to pay the new rates. The legislature failed to raise rates as promised and so the Exceptional Child Center and another home health-care provider sued the state for failing to comply with Medicaid’s pledge to make payments that are consistent with the quality of care.
The Supreme Court Justice Antonin Scalia penned the majority decision and part of what he noted was:
“It is difficult to imagine a requirement broader and less specific” than Medicaid for state payment plans. Given that this pledge is so vague, Justice Scalia and four other justices said that only the Department of Health and Human Services (HHS) could decide which state Medicaid program met these criteria, through the traditional regulatory review process.”
The Supreme Court also worried that if they decided in favor of the Exceptional Child Center, they would create a precedent, allowing physicians, hospitals, and other healthcare providers to sue every time they felt that the state’s Medicare payments were insufficient.
The plaintiffs were spot on about Medicaid’s reimbursement rates. Idaho’s Medicaid program reimburses hospitals 88% of what Medicare pays. While Medicare is estimated to reimburse hospitals on average about 80% of what private insurance pays, Medicaid reduces payments year after year with less physicians and other healthcare providers lining up to take Medicaid patients. However, Medicaid reimbursement throughout the country is not anything like what Idaho’s rates are.
To make matters worse, the department of Health and Human Services (HHS) has routinely expanded the list of procedures that states must reimburse under Medicaid and softened eligibility for the program. Because the Medicaid program’s financial obligations have ballooned like a farm pig, most states in the country are compelled to cut their reimbursements to physicians and hospitals.
Another example can be seen in the state of Wyoming. The costs of the Medicaid program began to cannibalize money from other programs within the state budget and since 2009 the cost of Medicare increased by 4% yet the funds to support it had only increased by 1%. Even when a state rejects the ever increasing expansion of the program, it will continue to consume a growing share of the budget.
After the Supreme Court’s ruling reaffirmed HHS as the Lone Ranger-judge of state compliance with Medicaid’s mandate, physicians and patients have even less legal standing to oppose and prevent future cuts in the program’s reimbursements. Along with that fact, all states now have more freedom to decrease reimbursements as the Medicaid program’s costs continue to grow.
A valuable lesson can be learned with this: goods and services that governments provide are entirely dependent upon the capacity of taxpayers to pay for them. And when state governments run out of taxpayer dollars, they fold like a cheap suit on their promises.
2. Physicians Don’t Always Accept Medicaid Patients
For individuals who are Medicaid eligible and require care, it can be very frustrating to obtain treatment. Why? Decreasing reimbursement causes physicians to opt-out of taking patients in the program. Take, for example, this patient’s plight from a miscellaneous post online:
“I have called every pediatrician that will take Medicaid in my area and every single one says they are not accepting new Medicaid patients. And even though my deceased husband has our son under his commercial insurance they still will not accept him as a patient because of the Medicaid. So what are we supposed to do, not have a pediatrician for a year and hope for the best? I am so frustrated. Now I would have rather paid for all my pregnancy visits out of pocket if it meant my son could have a doctor”
A 2011 nationwide survey of physicians reported that 31% were “unwilling” to accept new Medicaid patients, with acceptance rates across states varying widely. Across the country it was estimated that 69% of physicians were accepting Medicaid, but state acceptance rates varied from a low of 40% (New Jersey) to 99% (Wyoming) according to the study published in Health Affairs.
As of 2014, these numbers have changed to around 47% of physicians willing to accept new Medicaid patients. However, this variance is only likely to wax and wane slightly by state, as budget money is available for the program and as physician patient volumes allow for new indigent populations through their doors.
Adding worse news to bad is the fact that 50% of the physicians listed as Medicaid providers – ARE NOT really accepting Medicaid at all. According to the December 2014 “Access to Care Provider Availability in Medicaid Managed Care” report by Office of Inspector General (OIG):
“Half of providers could not offer appointments to enrollees.”
More than one-third of providers could not be found at the location listed by a Medicaid managed-care plan.
“In these cases, callers were sometimes told that the practice had never heard of the provider, or that the provider had practiced at the location in the past but had retired or left the practice. Some providers had left months or even years before the time of the call.”
“Over a 25% of providers had wait times of more than one month, and 10% had wait times longer than two months.”
These types of problems only serve to reinforce problems and perceptions with the Medicaid program for both providers and patients, but patients are the ones left holding the healthcare bag in terms of their health.
“For example,” the report said, “a number of obstetricians had wait times of more than one month, and one had wait times of more than two months for an enrollee who was eight weeks pregnant. Such lengthy wait times could result in a pregnant enrollee receiving no prenatal care in the first trimester of pregnancy.”
3. Physician Reimbursement
Medicaid pays, in some cases, pennies on the dollar for healthcare services. While this may sound very socially lovely and altruistic it cannot support the provider delivering the care. I have personally been amazed at the rates in the past, wondering how any hospital or physician can possibly afford to have a high number of indigent patients and stay in business without multiple grants, federal funding, state funding, and maybe finding a pot of gold at the end of a rainbow somewhere. However, one blogger recently noted how extreme it can be in a post. He quotes Val Jones, MD, stating:
“A physician friend of mine posted a copy of her Medicaid reimbursement on Facebook. Take a look at the charges compared to the actual reimbursement. She is paid between $6.82 and $17.54 for an hour of her time (i.e. on average, she makes less than minimum wage when treating a patient on Medicaid). The enthusiasm about expanding Medicaid coverage to the previously uninsured seems misplaced. Improved “access” to the healthcare system via Medicaid programs surely cannot result in lasting coverage. In-network physicians will continue to dwindle as their office overhead exceeds meager reimbursement levels. In reality, treating Medicaid patients is charity work. The fact that any physicians accept Medicaid is a testament to their generosity of spirit and missionary mindset. Expanding their pro bono workloads is nothing to cheer about. The Affordable Care Act’s “signature accomplishment” is tragically flawed – because offering health insurance to people that physicians cannot afford to accept is not better than being uninsured. After all, improved access to nothing… offers nothing. Inviting physicians to work for less than minimum wage so that politicians can crow about millions of uninsured Americans now having access to healthcare, is ridiculous. Medicaid expansion is widening the gap between the haves and the have-nots. The saddest part is that the have-nots just don’t realize it yet.”
No one who is trying to make money in their career is willing to take little or no money for their services for long without examining what can be improved to alleviate the drain of their wallet. After all, they have staff to support, bills to pay, and families of their own which likely rely on the income. Not to mention, after eight years of medical school the college loans probably feel like a crushing weight that only Atlas would be able to carry.
If you think this only impacts physician offices, think again. Consider the problems with the pharmaceutical industry. The mood of the pharmacy industry in 1965 was obviously much different than today since most pharmacies were not huge corporate entities, instead, they were locally owned and sourced, catering to cash-wielding customers. The Medicaid volumes for most pharmacies would be very small in proportion to their majority customer base, therefore, a smaller percentage of profit to help the less fortunate was not a great concern for the majority of pharmacies owned across the country. And while the new forms, processes, and government bureaucracy for reimbursement was a hassle, many pharmacists believed that with this government program they would be paid the fair Average Wholesale Price (AWP) and their dispensing fee. One pharmacist commenting on this subject states the following:
“The AWP was initially intended to represent the average price at which wholesalers sold their prescriptions to pharmacists. But it quickly became evident that it did not build in discounts, rebates, and other incentives. It didn't take long for payers to start chipping away at the AWP. In hindsight, maybe the AWP was a little overinflated, but it was the best we had to work with. What really bothered me, and I think the majority of pharmacists today, is that while the AWP was often not the actual price pharmacists paid for their drug products, nobody knew what the actual AWP really was. Despite this, third-party payers started to discount it with apparent disregard for current market indicators. It is a lot like buying a car. You really don't know what the dealer paid for it, but you know it should be discounted because it is assumed the dealer paid lower than the sticker price; but you really don't know how much lower. The only difference is that a car dealer would let you walk out the door if their profit goal was not met; pharmacists who dispense life-saving prescriptions cannot do this because of their contractual relationships with third-party vendors, including the U.S. Government.”
Now, 50 years later, there is the same debate over a fair reimbursement price, only the terms have changed. The new term is Average Manufacturer Price (AMP). However, the problem is much more severe. Cash customers no longer exist in bulk and most pharmacies are owned by corporations whose profits have plunged over the last 50 years with heavily discounted reimbursements. Similarly to what happened 50 years ago with AWP, the discussion now involves applying AMP only to Medicaid prescriptions. It’s likely that over time commercial insurers will follow the government’s example and just like it happened in the past, no one will be able to adequately and accurately calculate the AMP.
In 1965, just like today all chatter about AMP only focused upon the cost of the pharmacy product without considering the value pharmacies and pharmacists bring to healthcare. What would the industry look like with a huge shortage of qualified pharmacists to fill prescriptions? Will we lower the standards of prescription support by tasking unqualified staff which don’t know the nuances of pharmacological mixing, matching, dosage requirements, and drug interactions?
Download our free op-ed piece, "Medicaid: A Band-Aid For Patients And Providers," to read learn more about why I think Medicaid is coming up short.
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