Medicaid, which is the largest public health insurance provider in the United States was designed to help low-income people have easier access to healthcare insurance. Usually states design and administer their own Medicaid programs within federal rules. States determine how they will deliver and pay for care for Medicaid beneficiaries.
Medicaid MCOs (also referred to as “managed care plans”) are contracted by states to provide healthcare services to Medicaid beneficiaries. These MCOs accept a set per member per month payment for these services and are at financial risk for the Medicaid services specified in their contracts. States have pursued risk-based contracting with managed care plans for different purposes, seeking to increase budget predictability, constrain Medicaid spending, improve access to care and value, and meet other objectives.
One of the main issues affecting access to care is Medicaid’s low reimbursement rates. In 2019, more than two-thirds of medical practices reported that Medicare payments were not enough to cover the cost of delivering care, leaving healthcare administrators with a budget shortfall. Most healthcare organizations have ended up spending more money caring for Medicaid beneficiaries than they receive in reimbursement.
“For example, in 2020 hospitals received only 88 cents for every dollar spent caring for Medicaid patients. This amounted to a $24.8 billion underpayment. Low reimbursement rates limit access to quality care and contribute to poor health outcomes for Medicaid beneficiaries, who are inappropriately minorities and mostly people of color. Research suggests that increasing Medicaid primary care rates by $45 per service would reduce access to care inequities by at least 70 percent.
Not only does Medicaid pay out less, but healthcare providers face multiple billing problems. About 19 percent of the initial claims submitted to Medicaid are not paid in full. And although the Medicaid statute mandates the state to pay rates that ensure equal access for program beneficiaries, courts have always rejected beneficiary and provider attempts to enforce this mandate.
And when the disparity in the initial claims is put into consideration, with Medicaid already paying much less than other private insurance, these costs of incomplete payments eat up a huge chunk of money that healthcare administrators spend on Medicaid-funded programs. The result is that fewer providers take Medicaid patients.
These issues present healthcare administrators with challenges when providing healthcare services to these patients and at the same time maintaining fiscal responsibility. They must for instance invest their time and money to sort out any rejected or disputed claims.