Implementing Health Reform: Increasing Medicaid Payments for Primary Care Physicians

Timothy Jost

Posted 5/10/12 on the Health Affairs Blog

On May 9, 2012, the Center for Medicare and Medicaid Services released proposed regulations to implement section 1202 of the Health Care and Education Reform Act of 2010. Section 1202 increases Medicaid payments made to primary care physicians for primary care services during the years 2013 and 2014 to Medicare payment rates, with the additional cost covered by the federal government.

State Medicaid programs almost universally pay physicians lower rates than does Medicare (and much lower rates than private insurers).  In one recent year, state Medicaid payments to primary care physicians averaged 2/3 of Medicare rates, with some states paying as little as 36 percent of Medicare rates.  Many primary care physicians refuse to accept new Medicaid patients (or indeed any Medicaid patients), and low payment rates are undoubtedly one of the reasons why.

The Affordable Care Act’s expansion of Medicaid coverage to all adults with incomes below 138 percent of the poverty level, however, is going to dramatically increase the need for primary care physicians willing to accept Medicaid patients.  Congress increased Medicaid primary care payment rates temporarily for 2013 and 2014 to address this need.

Clarifying which providers and services qualify for enhanced payments. While the statute is reasonably clear and concise, the proposed rule addresses a number of questions that it leaves open.  Section 1202 provides that the enhanced payment is available to “a physician with a primary specialty designation of family medicine, general internal medicine, or pediatric medicine.”  The rule clarifies that this includes physicians who are board certified or eligible in one of the listed specialties or in a subspecialty of one of those specialties; physicians who self-attest that they practice in one of the relevant specialties are also included if a review of their billing history confirms that 60 percent of the services for which they bill Medicaid are services for which an enhanced payment rate is available under the section.

The enhanced payment rate is available only, the proposed rule concludes, for “physicians’ services” that would be payable by Medicare under the physician fee schedule.  The term excludes payment for services provided by physicians in federally qualified community health centers or rural health clinics, which are billed as facility services.  It would, on the other hand, include services provided by other practitioners, such as advanced practice nurses, under the supervision of a physician.

The statute identifies as eligible for enhanced payment the evaluation and management codes listed in HHS’s Healthcare Common Procedure System and certain vaccine CPT codes.  The proposed rule clarifies that this includes certain E & M codes that are not covered by Medicare but that would be of value to Medicaid recipients (such as children).

Eligible services are supposed to be compensated at a rate not less than that payable under the Medicare physician fee schedule for 2013 and 2014, or, if greater, a rate calculated using the conversion factor applicable in 2009.   Although it would be anticipated that payment rates would be higher in 2013 and 2014 than in 2009, until the sustainable growth rate formula is fixed permanently, there is always the possibility that future Medicare physician payment rates could drop precipitously, perhaps even below Medicaid payment rates.

Payment rates will be adjusted, as they are under Medicare, for site of service (office or facility-based) and for geographic location, but not to include special incentive payments otherwise offered specifically under the Medicare statute. Special payment rates will be developed for services unique to Medicaid.  States would have the option of either using the Medicare rate applicable at the beginning of calendar year 2013 and 2014, or of updating Medicaid payment rates periodically as Medicare rates are updated in the course of the year.

Under section 1202, the federal government is responsible for paying 100 percent of the difference between the state Medicaid rate applicable to a particular service on July 1, 2009, and the 2013 or 2014 Medicare rate or, if greater, the Medicare rate calculated using the 2009 conversion factor.  This requirement presents several problems.  First, there is the issue of dual eligibles.  When an individual is eligible for both Medicare and Medicaid, Medicare Part B currently pays 80 percent of an allowable physician charge, while Medicaid has the option of either paying the remaining 20 percent or an additional amount that would raise the total payment to the total allowable state Medicaid payment level (which may mean that no additional payment is made).  Under section 1202, the Medicaid program would be required to increase the payment to 100 percent of the Medicare level.  The additional amount that would have to be paid over what the state would otherwise have paid would be fully covered by the federal government.

Second, vaccine billing codes have changed since 2009, and thus 2009 state Medicaid payment rates for vaccine administration will have to be translated using a formula HHS is proposing to calculate the payment rate that HHS must top up to reach the Medicare vaccine payment rate.  Third, the proposed rule specifies that the 2009 state rate must be calculated inclusive of any supplemental or incentive payments that were included in 2009 payments.  Finally, where states provide primary care services through managed care contracts (which may be wholly or partially capitated) managed care contracts and payment methodologies for covered primary care services must ensure that enhanced federal match payments  directly benefit the primary care physicians that provide those services.

The proposed rule also proposes updates to the maximum payment rates available under the Vaccines for Children program, which have not been updated since the program began in 1994 and are badly outdated.  The VFC program provides vaccines for children who are eligible for Medicaid, who are uninsured, who are insured but do not have vaccine coverage, or who are Indians.  State Medicaid programs must pay primary care physicians for the administration of vaccines the lesser of Medicare payment rates or the regional maximums.  Providers may bill families eligible for the VFC program rates up to these maximum rates for vaccine administration, but can charge less, and may not deny services to families unable to pay.

What happens after 2014? The big question that both the ACA and the proposed rule leaves unanswered is what will happen to Medicaid primary care payment rates after 2014.  Presumably, absent further congressional intervention, they will revert to whatever rates state Medicaid programs choose to pay, as long as those rates otherwise comply with Medicaid requirements, specifically 42 U.S.C. 1396a(a)(30)(A), which mandates that states “assure that payments are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population” — a standard that historically has been honored more in its breach as in its observance.

Mental Health Parity FAQs

On May 9, the Labor Department also issued a series of frequently asked questions (FAQ) regarding the implementation of the Mental Health Parity and Addiction Equity Act of 2008.  While these FAQs do not apply directly to the Affordable Care Act, they are likely to be used to interpret the mental health parity provisions of the ACA.  The FAQs clarify that if a plan provides mental health and substance abuse benefits, it may not limit those benefits to inpatient services only.  Plans may carve out mental health services and handle them through managed behavioral health organizations as long as standards applied are comparable to and not more stringent than those applied to other services.  Indeed, this is the standard that plans must follow generally in applying non-quantitative treatment limitations to mental health and substance abuse services.

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