As Medicaid Rolls Expand, Payments to Providers Shrink

It’s a natural consequence that as the government forces states to expand their respective Medicaid programs, payments to healthcare providers fall.

I used to work at a hospital corporate office in the billing and collecting department. There were a few states that had Medicaid programs that paid enough for it to be worth it to us to accept those patients on a regular basis. I know that sounds completely uncaring and greedy, but in order for businesses to remain in operation, they have to be able to make a profit.

There were several states that had Medicaid programs that wouldn’t have even covered our costs for care. We could take those Medicaid patients as charity cases on an infrequent basis, but we couldn’t take them on a regular basis, or else we’d end up in the red and have to shut down.

Medicare payments weren’t much better, as they barely covered cost. We had to rely on private insurance carriers to help us remain in the black. And people wonder why healthcare costs are so high, and why hospitals “overcharge.” From a purely business perspective, if you want to make a profit, you have no choice but to “overcharge.” If all you did was sell your product or service at cost, then you wouldn’t be in business very long. This isn’t hard math.

Likewise, if you’re in the business of offering healthcare as a service, you have to charge such that you turn a profit. And when a majority of your income comes from poorly-run government programs like Medicare that pay pennies on the dollar, and where you’re stuck with whatever payment they give you (you have to accept whatever they give you as payment in full with little or no recourse in appeals), you have to charge a lot just to compensate yourself for all the lost revenue. This is what happens when government becomes so involved in things that should have remained in the private sector. Costs go up, and access and quality go down.

The New York Times is reporting that as the Medicaid rolls expand, payments to healthcare providers will go down, and access to healthcare will be more difficult:

Just as millions of people are gaining insurance through Medicaid, the program is poised to make deep cuts in payments to many doctors, prompting some physicians and consumer advocates to warn that the reductions could make it more difficult for Medicaid patients to obtain care.

The Affordable Care Act provided a big increase in Medicaid payments for primary care in 2013 and 2014. But the increase expires on Thursday — just weeks after the Obama administration told the Supreme Court that doctors and other providers had no legal right to challenge the adequacy of payments they received from Medicaid.

The impact will vary by state, but a study by the Urban Institute, a nonpartisan research organization, estimates that doctors who have been receiving the enhanced payments will see their fees for primary care cut by 43 percent, on average.

Stephen Zuckerman, a health economist at the Urban Institute and co-author of the report, said Medicaid payments for primary care services could drop by 50 percent or more in California, Florida, New York and Pennsylvania, among other states.


Dr. George J. Petruncio, a family physician in Turnersville, N.J., described the cuts as a “bait and switch” move. “The government attempted to entice physicians into Medicaid with higher rates, then lowers reimbursement once the doctors are involved,” he said.


The White House says Medicaid is contributing to the “largest coverage gains in four decades,” with 9.7 million people added to the Medicaid rolls since October 2013, bringing the total to 68.5 million. More than one-fifth of Americans are now covered by Medicaid.

But federal officials have not set forth a strategy to expand access to care with enrollment, and in many states Medicaid payment rates for primary care services, like routine office visits and the management of chronic illnesses, will plunge back to 2012 levels, widely seen as inadequate.

This is what’s expected when the government tries taking over an industry. They encourage people to sign up for Medicaid and other similar programs by changing the eligibility criteria. Then they tout their growing numbers and claim that they’re “taking care” of all these poor people (with other people’s money, of course). But since this kind of government program is totally unsustainable, they have no choice but to cut their payouts. That puts doctors and hospitals in very awkward positions where they’d like to take care of these poor people, but they can’t, because they can’t afford to. The reimbursements are too scant.

I think part of the problem is that there are too many people involved who all want a piece of the pie. You have people in the hospital industry; people in the insurance industry; people in government who want control of those industries using poorly-spent taxpayer money. The people who get left out of everything are the everyday taxpayers.

The solution isn’t to clamor for more Medicaid money and increased payouts. If that’s the solution, then no one will ever be satisfied with how much they’re getting. People are greedy; they’ll always beg for more and more government money.

The solution is to get the government out of these industries, and that’s easier said that done. Those at the top of these industries depend on government intervention to continue to wipe out their competition.

Perhaps doctors and hospitals should operate less like businesses and more like services or ministries, reliant on charitable donations from individuals, groups and churches. I realize that would totally remove the financial incentive for people to become doctors. But isn’t that a good thing? There’s nothing wrong with making money and making a profit, but those who are driven solely by how much money they can make are the ones who aren’t going to care about you as a patient or a person. They’re the ones who’d want to build their own empire and use the government as a weapon to wipe out their competition, all at your and my expense.

The same could be said for the insurance industry. It used to be that the insurance companies covered your expenses when something catastrophic and unexpected happened. They didn’t cover your regular doctors’ visits. But along the way, people saw the exorbitant amount of money that could be gained by convincing as many people as possible to sign up for their insurance policies that would cover everything (at a particular percentage, depending on which policy you bought). And then when the time came for the insurance company to pay up, they’d find some reason not to pay it and claim that whatever they’re supposed to be paying for isn’t actually covered in the policy. And that’s how they make money. By collecting your premiums and not paying claims. And executives get bonuses dependent on how much money they “save” their company.

Now, I understand that I’m giving the worst-case scenario nowadays, as there are good hospitals and good insurance companies out there. But I’d argue that these scenarios are becoming more and more common as all the entities involved become more greedy.

Obviously lots of things have to change. Our culture has to change. Our attitudes about healthcare and the role of government have to change. Do we really need to go to the doctor for a runny nose (I’m exaggerating, but not by much)? Many Americans want instant gratification. That’s why we turn to concentrated drugs to take away our headaches and pains. We go to the doctor for everything. Insurance companies, doctors and governments have encouraged this mentality because of what money can be made if everyone is made their customer. Not customers that they particularly care about. Just people they can use to extract money from.