Medicaid Should Not Impoverish Doctors and Hospitals

July 28, 2014
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Medicaid beneficiaries deserve the same access to healthcare services and products as people with commercial insurance or Medicare. But since Medicaid pays doctors and hospitals 27 to 65 percent less than commercial health plans (according to a new GAO report), it makes it awfully difficult for providers to be payer agnostic. Sure enough, we see even supposedly mission-driven non-profit healthcare systems looking to maximize their share of the commercial population by catering to that group.

That’s a real public policy problem as the proportion of patients with Medicaid increases, and it presents providers with an unreasonable dilemma.  In many states, doctors or hospitals that take care of a high proportion of Medicaid patients will find themselves in financial distress. That’s not fair to them or the Medicaid recipients. Frankly it’s also unfair to the commercial customers who may be overpaying to compensate for Medicaid underpayments.

Compare Medicaid with the Supplemental Nutrition Assistance Program (SNAP), aka Food Stamps. SNAP recipients don’t bankrupt supermarkets. That’s because the government pays the same price for groceries as any other customer. The SNAP program doesn’t demand that the grocery store sell products below cost, nor should it. SNAP recipients have to be savvy about how they use their benefit, seeking out high value products and retailers to stretch their dollar.

Realistically we won’t see the disparity between Medicaid and commercial payment rates erased any time soon. It would be just too expensive. But there are steps that can and should be taken:

  • Narrow the gap over time from the current 27 to 65 percent to something more like 10 to 15 percent
  • Introduce more progressive payment mechanisms –like Medicaid Accountable Care Organizations– that provide health systems with incentives to contain costs and improve quality. Healthcare systems that figure out how to help Medicaid members become healthier for a lower cost will prosper –analogous to what Walmart does with SNAP payments
  • Provide incentives for Medicaid beneficiaries to seek lower cost, higher quality care. Let’s not be paternalistic and assume that people on Medicaid aren’t capable of identifying high quality, low cost services.. I’ll venture to say that many lower income Americans are savvier shoppers than average consumers, if only due to necessity

The GAO report should be a wakeup call. It’s time to do something about these disparities beyond simply shrugging our shoulders.

photo: nffcnnr via photopin cc

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