BETHESDA, MD – Medicaid physician fees rose 15.1 percent between 2003 and 2008, closing a portion of the gap with Medicare physician payment rates, according to a study by the Urban Institute.

“Medicaid has historically paid physicians less than both private insurers and Medicare for the same services, contributing to reduced physician participation in Medicaid in some areas and raising concerns over access to care for enrollees,” said lead author Stephen Zuckerman, a senior fellow at the Urban Institute’s Health Policy Center. “These concerns were a primary reason that state Medicaid programs increased physician fees during the late 1990s and early 2000s.”

The study, conducted by Zuckerman, Aimee Williams and Karen Stockley, in partnership with the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured and the California HealthCare Foundation, provides the first national and state-by-state update of Medicaid physician fees since 2003.

Although findings are based only on Medicaid fee-for-service physician reimbursement, nearly two-thirds of program spending still occurs in the fee-for-service setting, where elderly and disabled enrollees with the greatest health needs primarily receive their care.

“State revenue declines during the current economic crisis heighten the need to monitor this issue since many states sought to reduce Medicaid spending growth during past recessions through provider payment cuts,” said Zuckerman.

The 15.1 percent increase represents an average annual growth rate of 2.6 percent. Over the same period, the Consumer Price Index increased 20.3 percent (3.4 percent annually) and the medical care services component of the CPI – which includes physician services – increased 28.1 percent (4.6 percent annually).

Among all categories of Medicaid physician fees, only primary care services kept pace with inflation.
Fees increased by less than the rate of general inflation in 25 states, and fees increased by less than 5 percent over those five years in eight states: Alabama, Alaska, Arkansas, California, Florida, Hawaii, West Virginia and Wisconsin.

Levels of Medicaid physician fees varied widely in 2003, and that variation remained fairly constant over the following five years. In 2008, Medicaid physician fees in six states and the District of Columbia were more than 10 percent below the average across all states. New Jersey’s Medicaid program paid the lowest physician fees, at 58 percent of the national average.

Medicare is federally run, and Medicaid is a state and federal partnership. The state chooses how much to reimburse beyond what the mandatory core package is; there is no set number, according to Mary Kahn, Medicaid press officer for CMS.

“We will match those expenditures, but they decide what that will be,” she said.