Rule Would Discourage States’ Cutting Medicaid Payments to Providers

In a new effort to increase access to health care for poor people, the Obama administration is proposing a new rule that would make it much more difficult for states to cut Medicaid payments to doctors and hospitals.

The rule could also put pressure on some states to increase Medicaid payment rates. Federal officials said that the rule was needed to fulfill the promise of federal law, which says Medicaid recipients should have access to health care at least to the same extent as the general population. “We have a responsibility to ensure sufficient beneficiary access to covered services,” the administration said in issuing the proposal, to be published in the upcoming Federal Register.

In many parts of the country, Medicaid recipients have difficulty finding doctors who will take them because Medicaid payment rates are so low. Faced with huge financial problems, many states have frozen or reduced Medicaid payments to health care providers, and governors of both parties have proposed additional cuts this year.

Medicaid recipients and health care providers have sued state officials to block such cuts, and one case, from California, is pending in the United States Supreme Court. “Tight state budgets, coupled with increased demand for services during the recession, have led many states to propose reductions in Medicaid provider payments, without clear federal guidance on how to assure access,” said Cindy Mann, the federal official in charge of Medicaid.

Medicaid is financed jointly by the federal government and the states. Even before the recent recession, it was one of the fastest-growing items in most state budgets. The new initiative comes as federal and state officials prepare for a huge expansion of Medicaid eligibility, scheduled to occur in 2014 under the new health care law. About half of the 34 million uninsured people who are expected to gain coverage under the law will get it through Medicaid. The proposed rule generally prevents states from cutting Medicaid payments to providers unless they can show that Medicaid recipients will have “sufficient access” to care after the cuts.

In an effort to rein in costs, states have increasingly turned to health maintenance organizations and other types of managed care. The new rule does not apply to managed care, but the Obama administration said it was “considering future proposals” to guarantee access to care for Medicaid recipients in such private health plans.

ADVOCATE will continue to provide updates as they become available.

With best regards,
Kirk Reinitz, CPA