Overview of the 2013-2014 Medicaid payment increase for primary care services

Topics: Medicaid, Reimbursement, Finance, Medicare, Practice Management, Physician Issues

Teresa Breen

Teresa Breen, Physician Practice Roundtable

For 2013 and 2014, practically all primary care physicians should receive a substantial increase in Medicaid payment rates, thanks to provisions in the Affordable Care Act aimed at boosting physician participation in the Medicaid program.

In some states, Medicaid payments could more than double, and most states will see a double-digit rate increase. The federally-funded Medicaid rate change went into effect Jan. 1, following the release of CMS’s final rule on the subject last November.

Most physician organizations should greet this news with cautious optimism. The rate increase is a significant incentive for PCPs to see more Medicaid patients. However, the rates could drop to their previous levels in 2015, after this initiative expires, so practices should take future payments into account when deciding how many Medicaid patients to add to their panels.

Also, we expect that administrators will need to be proactive with Medicaid managed care payers to ensure that they receive the new higher rates for all of their Medicaid patients—not just the fee-for-service Medicaid population. Read on for our full analysis.

Overview of ACA Provision and Final Rule

Goal of boosting physician participation in Medicaid

States that implement the ACA’s Medicaid expansion will see a large number of new patients joining their Medicaid rolls. The goal of the 2013-2014 payment increase is to boost physician participation in the Medicaid program to enhance primary care access for these new patients.

This payment increase is only mandated in the ACA for CY 2013 and 2014. States are required to provide CMS information on physician participation in Medicaid and Medicaid utilization of the ACA primary care codes as of July 1, 2009, and during 2013. This data will be important for evaluating the impact of the reimbursement increase, and for federal lawmakers’ potential consideration of this policy beyond 2014.

Qualified services and physicians

  • Read four key takeaways for specialists within family medicine, internal medicine, and pediatrics—and how they may be eligible for the payment increase.

This payment increase applies to E&M codes 99201 through 99449 and certain vaccine administration codes. States can make the higher Medicaid payments as either add-ons to their existing reimbursement rates, or as lump-sum payments to providers.

Family physicians, internists, and pediatricians, as well as subspecialists in those fields, qualify for this payment increase. In addition, the payment adjustment is available to physicians whose claims show that at least 60% of the Medicaid codes they billed in the previous year were primary care codes as identified in the ACA. Services furnished by non-physician providers under the supervision of a qualified physician also qualify for this increased Medicaid reimbursement.

Providers in federally qualified health centers (FQHCs), rural health centers (RHCs), and other settings where payment is made to the facility, rather than to the physician, do not qualify for the fee increase.

Impact of payment increase will vary state to state

Overall, states are due to see over $11 billion in additional federal health care funding over the next two years as a result of this payment expansion—a boost that will result in an estimated 64% average pay increase for applicable services.

While the effect nationally will be an increase in reimbursement for primary care physicians, as the Kaiser Family Foundation reports, the actual ramifications of this rule will vary between states based on their different levels of Medicaid reimbursement, as seen in these charts:

Five Largest Increases by State

Click to view the graphic in full size

Payment increase not vulnerable to state-level Medicaid coverage expansion or SGR

This payment will be based on the difference in state Medicaid rates that were in effect on July 1, 2009, and Medicare rates that will be in effect for 2013 and 2014. It will be paid in full by the federal government. 

States that lowered their Medicaid reimbursement since July 1, 2009, will have to fund their regular share of that difference as the 100% federal match applies only to increases over the July 1, 2009, rates. Similarly, states whose current Medicaid reimbursement rates exceed their July 1, 2009, rates will realize savings.

In addition, presumably to shield qualified physicians from the possibility of a Sustainable Growth Rate (SGR) cut to Medicare reimbursement, CMS will reimburse qualified primary care services using the 2009 Medicare conversion factor should it exceed the one applied in 2013 and 2014.

Full payment increase must be passed to physicians in Medicaid managed care organizations

The ACA requires qualified physicians in Medicaid managed care organizations (MCOs) receive the full benefit of the fee increase, regardless of whether they are paid on a fee-for-service, capitation, or other basis.

States must submit methodologies to CMS for identifying what MCO payments to qualified physicians would have been for the ACA primary care services as of July 1, 2009, and for identifying the portion of their 2013 and 2014 capitation payments attributable to the fee increase.

Dual eligibles

Physicians providing care for dual eligibles often lose out on some—or all—of the Medicare 20% coinsurance because most states limit the amount of the Medicare coinsurance they pay on behalf of these patients to the states Medicaid fee. Under this payment change rule, all qualified physicians providing care for dual eligibles will receive the full Medicare amount.

Update to administrative fee in VFC program

The final rule also includes an update to the Vaccines for Children (VFC) program. It uses the Medicare Economic Index to adjust upward the maximum administrative fee that providers can charge for vaccines under the program.

Though this is the first adjustment to the VCF administrative fee since the program was established in 1994, because they will be busy with the Medicaid payment adjustment, the government does not expect states to adjust their local rates to account for this change in the next two years.

Two Key Considerations for Physician Organizations

Communicate with Medicaid managed care payers

CMS intends to fully pass this Medicaid payment increase to providers, regardless of whether they are in managed care contracts. To account for the varied nature of Medicaid managed care agreements, CMS has not specified precisely how this payment increase should be administered.

As a result, it is important for physician practices to communicate with their managed care payers to ensure this obligation is being met in a clear and transparent way.

Evaluate ability to take on additional Medicaid patients beyond 2014

Although the 2013-2014 payment increase offers a significant incentive for PCPs to see more Medicaid patients, providers should remember this payment increase is currently only being offered over the next two years.

As a result, physician practices should carefully consider their ability to effectively manage Medicaid patients before rushing to add them to their panels or signing new Medicaid managed care contracts. It is important to discuss this in the context of your own practice and consider what your strategy will be if Medicaid payments drop back down to their current rates in 2015.

Learn More

For resources on implementing care management models for Medicaid patients, please see our Medicaid Resource Guide.

For further information on changes to Medicare physician compensation in 2013, please access our recent webconference