Leveraging the Medicaid Provider Rate Increase to Improve Primary Care

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These are historic days for Medicaid. Poised to serve up to 80 million Americans by 2019, the program will become the nation’s largest health insurance purchaser, covering a quarter of the U.S. population.1 That tremendous purchasing power should put higher-value, more efficient health care delivery within Medicaid’s reach. Yet problems with access to care, even among children, are endemic to the program and must be addressed.2 The strengthening of primary care—the heart of any health care system—should be another pillar of that agenda.

Historically, reimbursement for physician services in Medicaid has lagged far behind both private payers and Medicare, discouraging providers from participating, limiting access in some regions, and potentially hindering practice transformation. While some states have increased reimbursement more recently, Medicaid fee-for service primary care provider (PCP) payments nationwide averaged only 66 percent of Medicare rates in 2008, with only five of the 50 states paying rates close to the Medicare standard. The Affordable Care Act has taken an important step toward better access and quality outcomes for patients by mandating that Medicaid reimburse certain PCPs at parity with Medicare rates in 2013 and 2014.

The PCP "bump" will infuse up to $8.3 billion3 into the Medicaid primary care delivery system. And for states, that short-term increase can—and should—serve as a lever to achieve much broader, long-term policy objectives in the realms of payment reform and primary care transformation.

This is an unprecedented opportunity, as it is one of the few mandatory, fully funded provisions designed to bolster Medicaid primary care. Many states are at work on ways to transform Medicaid primary care in anticipation of expanding coverage to the nation's uninsured. Paying PCPs at Medicare levels provides a critical foundation for those efforts.

This week, the Center for Health Care Strategies (CHCS), with support from The Commonwealth Fund, launched Using the Medicaid Rate Increase as a Lever for Primary Care Delivery and Payment Reform, a new initiative designed to help states use the increase to support payment reforms, maintain or expand access to care, and expand performance measurement—all critical building blocks for a health care delivery system built upon a robust base of primary care.

While the rate increase lays a foundation for strengthening primary care, states must chart a path that supports true primary care transformation. This goal demands a multipronged strategy, including: 1) addressing the PCP shortage; 2) realigning payment levels and reforms to support advanced, quality-focused primary care models; 3) transforming the structure of the primary care team itself through team-based care, education, and practice supports; and 4) reshaping how and when patients access primary care.

The rate increase opens a window to broader primary care payment reform that could drive the adoption of innovative models of primary care. Various states are testing alternative payment methods through care management, episode-of-care, and global payments. Medicaid programs could seek to support such payment models through the partnership initiatives being developed by the Centers for Medicare and Medicaid Services (CMS) and the enhanced federal funding available through the Affordable Care Act (in Section 1202 of the Health Care and Education Reconciliation Act).

These new payment systems, and the increased PCP funding, could be used to fund advanced primary care models such as medical homes, health homes, and accountable care organizations. By strategically funneling the rate increase through payment models that make it financially viable for primary care practices to invest in these newer frameworks for health care delivery, states could make even more of this opportunity.

With the rate increase, health care reform has presented Medicaid agencies with a unique opportunity to lift all boats within their primary care systems, in the more immediate environment and into the future. Medicaid primary care transformation depends on both innovative payment models and an infusion of revenue into primary care, and states can use Section 1202 to begin that process. The increase can help push a broader primary care transformation agenda if Medicaid stakeholders can use the increase to make strategic, short-term decisions that offer maximal long-term impact.

The newly launched CHCS initiative will assist states with this task. Through this state collaborative, CHCS will provide practical guidance to Medicaid agencies and health plans on how to incorporate the rate increase into a broader primary care strategy, based on the forthcoming CMS regulations. The project will help stakeholders:

  • incorporate the increase into payment models that go beyond fee for service, within the regulatory framework;
  • use the rate increase to foster greater accountability through performance measurement programs, which Medicare and many commercial payers already have in place;
  • maintain or expand beneficiary access to primary care; and
  • assess the impact of the rate increase with an eye toward sustaining it beyond 2014.

The increased reimbursement can be a powerful tool for bolstering the delivery system by enhancing access to, and improving the quality of, primary care for current and new beneficiaries. We look forward to helping states make the most of this opportunity.


1 A. M. Sisko, C. Truffer, S. P. Keehan et al., "National Health Spending Projections: The Estimated Impact of Reform Through 2019," Health Affairs, Oct. 2010 29(10):1933–41.

2 D. Grady, "Children on Medicaid Shown to Wait Longer for Care," New York Times, June 15, 2011.

3 D. Elmendorf, Congressional Budget Office estimate sent to House Speaker Nancy Pelosi on the combined effects of the Patient Protection and Affordable Care Act and the Reconciliation Act, March 20, 2010.

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