Will The Obama Administration’s Efforts To Expand Medicaid In The States Lower Access To Care?

In a blow to Americans relying on Medicaid — the state-federal partnership public health insurance program that covers disabled and low-income Americans — the federal government on Tuesday reaffirmed to a California federal appellate court that, in the Obama Administration’s opinion, “states could cut Medicaid payments to many doctors and other health care providers to hold down costs in the program,” paving the way for massive state health care cuts that will further discourage doctors from treating low-income patients enrolled in the program.

Doctors, health care providers, and patient advocacy groups sued California in response to state health officials’ decision to cut already-low reimbursement rates for providers that treat patients on Medi-Cal — California’s Medicaid program — by an extra 10 percent. State leaders led by Gov. Jerry Brown (D) argue that the payment cuts are necessary for California’s fiscal security, especially as the state expands Medi-Cal to an addition 1.8 million Californians under Obamacare. But critics assert that the drastic payment cuts will make treating current and prospective Medi-Cal beneficiaries anathema to California care providers:

Medicaid is one of the fastest-growing items in state budgets. Cutting payment rates saves money for states and for the federal government, which will pay most of the costs for people who become eligible for Medicaid under the new law.

Health care providers said California’s payment rates were inadequate even before the cuts. They pointed to a federal study that said, “California stands out because of its very low Medicaid payment levels.”

In an interview, Dr. Paul R. Phinney, president of the California Medical Association, a plaintiff in one of the court cases, said: “Two-thirds of doctors in California cannot afford to participate in Medicaid because the rates are so low. The problem will only get worse if rates are cut as we move more and more people into Medicaid.”

The Administration’s endorsement of the Medicaid payment cuts underscores just how badly federal officials want states to take part in Obamacare’s Medicaid expansion. Formally blessing states’ abilities to “reasonably” lower their Medicaid physician payment rates is likely a concession aimed at luring reticent governors into accepting the expansion, since it will save both states and the federal government money. But while expanding Medicaid under Obamacare is crucial for the health and financial security for millions of low-income Americans, drastically lowering hospitals’ and physicians’ Medicaid reimbursements — which are already far less generous than Medicare reimbursements — is rife with risks.

Certainly, provider cuts are preferable to cutting special Medicaid benefits for the poor and disabled that are not available on lower-tier private insurance plans, especially in a state like California that has had its fair share of problems with providing adequate services to Medi-Cal beneficiaries. But California already has 6.8 million residents on Medi-Cal, including one in three Californian children and the majority of HIV-positive Californians. Payment cuts that discourage providers from treating these Medi-Cal beneficiaries will leave millions of Americans with few facilities to go to for their care, making them dependent on either free clinics, costly emergency room care, or forcing them to travel massive distances to find an accepting provider.

Reporting on a 2012 study finding that one in three American doctors won’t take new Medicaid patients, Wonkblog’s Sarah Kliff presciently wrote that that could spell trouble for states with historically low Medicaid reimbursement rates — such as California — that also wanted to expand Medicaid, since “fewer than 60 percent of providers accept new patients in the [Medi-Cal] program.” With Brown’s new Administration-endorsed payment cuts set to hit California’s safety net providers, that number has nowhere to go but down.