It was recently reported that a study in the Annals of Internal Medicine found, contrary to expectations, that demands on safety-net providers in Massachusetts have actually increased as a result of moving to a full coverage model. While the study concludes that patients choose to use safety-net providers because of affordability and convenience, the underlying story could be more about the choices of the providers, not the patients.
A large number of non safety-net hospitals and physicians now see Medicaid patients because they frankly have no other choice. Nationally about one in three persons is on Medicaid or uninsured, and Medicaid and Disproportionate Share Hospital payments for the uninsured generally cover more than marginal costs. It currently makes financial sense for hospitals and physicians to fill excess capacity with these patients.
With expansion of coverage in the private sector – under an individual mandate or otherwise – these providers will have a choice. A large number of the previously uninsured will become covered under commercial plans that will almost surely pay higher rates than Medicaid. The economically rational decision for providers, especially those without a specific safety-net mission, will be to shift their attention from Medicaid patients to more generously reimbursed commercially insured patients. These providers will no longer have the financial imperative to be as affordable or convenient to patients with a Medicaid card.
When this happens, traditional safety nets can expect to see a greater share of the total Medicaid population and the remaining uninsured. This is happening in Massachusetts as emergency room visits have increased and safety-net providers such as community health centers report large increases in Medicaid patients in general.
Federal health reform extends the Massachusetts dynamic nationally. Not only will providers shift away from the current Medicaid population; the new Medicaid expansion population will arrive with many fewer providers to serve them. If Massachusetts is feeling these effects with a high number of primary care doctors per capita and a small uninsured gap to fill, imagine the problem facing South Carolina and others states which have the opposite problem – too few primary care doctors and too many uninsured.
As demand outstrips supply we can expect large increases in waiting time for services and a price war for providers between Medicaid and commercial insurers. Regardless of the administration’s arguments, little in the Affordable Care Act (ACA) addresses this dynamic. Increases in primary care physician fees, funding for Federally Qualified Health Centers, and national health services corps slots don’t build any new physician capacity; they only drive more competition for limited physicians and fuel a price war. It is likely the administration is relying on the Independent Payment Advisory Board and their new premium rate review power over private insurance to try to control prices, but waiting lines and an increased reliance on the emergency room will be a new fact of life.
Government price controls are tough medicine to administer and swallow – ask any Medicaid director who fights the battles. The Supreme Court case on California’s rate reductions should serve as a warning shot over Medicaid’s bow. The Centers for Medicare and Medicaid Services, even in the absence of final “access” rules, is already clamping down on proposed rate changes necessary to balance many state budgets. This is at the same time that both the President and Congress are contemplating shifting more costs to the states through changes to the “FMAP” (Federal Medical Assistance Percentages) formula, as well as limits on provider taxes and the Disproportionate Share Program.
Having talked with hundreds of physicians in South Carolina since last January and thousands of physicians over my career, I think we are dangerously underestimating their frustration with the system and overestimating their willingness to “get with the program.” Government can’t force physicians to work more hours, choose a career in primary care more often, stay in rural areas, or see more Medicaid patients, and we can’t easily augment physician capacity through telemedicine, practice changes, and other means in the short timeframe mandated by ACA.
The President should recognize in ACA what he already has in No Child Left Behind: Good intentions at the federal level are nothing without the ability to execute at the local level. He should grant states ACA waivers based on progress toward mutually negotiated health improvement goals before the inevitable occurs – not after. Otherwise I’m afraid the unintended consequences of the President’s plan will be to widen health disparities, not narrow them. Poor folks do not traditionally win battles for limited resources, but that battle it is exactly what this plan is bringing.