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Raising Medicaid Primary Care Rates: Next Steps for States

  • Tricia McGinnis

    Vice President and Director of Delivery System Reform, Center for Health Care Strategies, Inc.

  • Tricia McGinnis

    Vice President and Director of Delivery System Reform, Center for Health Care Strategies, Inc.

The Department of Health and Human Services (HHS) recently released long-awaited proposed regulations for implementing the Affordable Care Act's Medicaid primary care rate increase. Reimbursement rates for all types of health care services provided to Medicaid beneficiaries have historically lagged behind fees paid to providers treating Medicare beneficiaries or people with private insurance. As of 2008, Medicaid fee-for-service provider payments were only 66 percent of Medicare rates on average, with just five states paying rates close to the Medicare level.

Even Medicare has tended to underpay for primary care, a shortcoming addressed in the health reform law by a provision increasing Medicare payments for certain primary care services by 10 percent from 2011 through 2016. Not only is this increase expected to improve access to primary care, but there is evidence that such an increase can reduce Medicare spending over time.

To address primary care underpayment in Medicaid, in 2013 and 2014, states must reimburse Medicaid primary care providers on par with Medicare rates for certain services, with the federal government picking up the cost of the increase. The increase aims to encourage more providers to participate in Medicaid, promoting access to primary care for current beneficiaries, as well as the 16 to 20 million individuals who will be eligible for Medicaid through coverage expansion in 2014. Research suggests that a Medicaid rate increase would also decrease inappropriate emergency room use.

The following are takeaways from the proposed rule:

Provider eligibility. States eager to use the rate increase to improve access and strengthen primary care will benefit from the broad approach to provider eligibility. Family medicine, general internal medicine, and pediatric medicine specialists and subspecialists recognized by the American Board of Medical Specialties will be eligible.

Physician extenders. Notably, physician extenders, such as nurse practitioners and physician assistants, will also be eligible, if service delivery is supervised by an eligible physician and properly billed under that provider's number.

Covered services. The proposed regulation seeks to include all primary care services specified in the statute, including services for which Medicare sets rates but does not cover. (The increased payment rates are based on the Medicare fee schedule and exclude the recent 10 percent bonus that went into effect in 2012 as part of the Affordable Care.) States are given discretion over whether to set a fixed annual fee schedule based on Medicare rates at the beginning of 2013 and 2014 or to make adjustments reflecting Medicare changes made during the year.

Managed care. Implementing the rate increase within managed care may present challenges. The proposed rule seeks to ensure that Medicaid health plans implement the increase uniformly and that primary care providers receive the full increase. States must modify health plan contract amendments to reflect these requirements. Health plans must accurately report expenditures eligible for 100 percent federal reimbursement to the states. Adjusting health plan capitation rates to reflect the rate increase will be methodologically complex. The proposed rule suggests an approach, but also provides flexibility for states to define their methodology and submit it to the Centers for Medicare and Medicaid Services (CMS) for approval.

Though the proposed rule is not final, states can take the following steps now to begin the implementation process:

  • Provide input to HHS on the proposed rule at
  • Evaluate the fee schedule for alignment with Medicare site of service and payment regions.
  • Identify strategies to document the rate differential.
  • Gather information to identify potential methodologies for revising managed care capitation rates.
  • Determine health plan reporting options for eligible expenditures.
  • Explore strategies for confirming primary care provider eligibility.
  • Identify primary care provider outreach strategies and engage relevant stakeholders, including state and local medical societies and nonphysician provider groups.

Over the next few months, CMS will be working closely with states to answer remaining questions. For example, the proposed rule does not address how states using advanced payment methodologies—bundled payments for episodes of care, quality-based payments, case management fees, and global payments—would incorporate the rate increase. Since states across the country are exploring new payment models, further clarification from CMS would be helpful.

Still, states that have been awaiting federal guidance can move forward with implementation strategies. Getting Medicaid provider rates at parity with Medicare is a crucial first step for reducing health care disparities and strengthening the foundation of the nation's primary care system.

See a recent Commonwealth Fund–supported fact sheet prepared by the Center for Health Care Strategies for more information.

Publication Details



Raising Medicaid Primary Care Rates: Next Steps for States, The Commonwealth Fund Blog, May 2012.