Research & Commentary: Reimbursement Flaws in Medicaid and the ACA

Published June 27, 2014

Fewer doctors are accepting new Medicaid patients today, in part due to low reimbursement rates and a large increase in Medicaid enrollment caused by states expanding Medicaid in response to the Affordable Care Act (ACA) promise of additional federal funds. 

Medicaid reimburses physicians about 60 percent of what private insurers pay, according to Devon Herrick, a senior fellow at the National Center for Policy Analysis. The reimbursements, often taking months to be paid,  frequently account for far less than what it actually costs to provide care. A physician’s practice cannot afford to take too many patients receiving subsidized care, and many limit the number of Medicaid patients they treat compared to those with private insurance or refuse to accept subsidized patients at all. 

Reimbursement rates on the ACA exchanges fare no better. Based on a series of interviews with physicians, Roni Caryn Rabin in a Kaiser Health News article determined the rates at which the government reimburses doctors through the state and federal exchanges are far lower than for private commercial plans: “[I]f … Medicare pays $90 for an office visit of a complex nature, and a commercial plan pays $100 or more, some exchange plans are offering $60 to $70.” 

The number of doctors accepting Medicaid patients has fallen sharply in recent years, due in no small part to worsening reimbursement rates. In a recent survey by Merritt-Hawkins, a national health care consulting firm, on average only 45.7 percent of doctors in five specialties in 15 metropolitan markets reported they accept Medicaid. This rate is considerably lower than the Medicaid acceptance rates found by the same survey in 2009 (55.4 percent) and 2004 (49.9 percent). 

Few doctors expect reimbursement rates to improve. According to a nationwide poll conducted by the American College of Emergency Physicians (ACEP), 51 percent of emergency doctors expect payment for emergency visits to fall as a result of the Affordable Care Act. 

The authors of the Affordable Care Act tried to address the reimbursement problem by temporarily increasing Medicaid reimbursement rates to Medicare levels, creating an incentive for physicians to accept new Medicaid patients. Funding for this temporary increase will stop at the end of 2014 unless new legislation extending it is passed. Once the temporary fix ends, states will be required to fund considerably higher Medicaid expenditures, while payments to doctors will fall even further. Nonetheless, this does not mean the temporary fixes should be extended. 

The flawed Medicaid model is costly to taxpayers, delivers subpar health care, and shifts more power to the federal government. It should not be expanded. State lawmakers should focus instead on reform options like those piloted in Florida that reduce costs and offer better care to patients in the existing system. 

The following articles examine Medicaid reimbursement rates from several perspectives.

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems. 

Doctors Face A 24% Pay Cut in Both Medicare And Medicaid Reimbursements
Writing in Forbes, Merrill Matthews of the Institute for Policy Innovation argues that under Obamacare, doctors seeing Medicare and Medicaid patients face a 24 percent cut in reimbursements beginning January 1. “But almost no one has grasped that those cuts will hit Medicaid too—thanks to Obamacare,” Matthews writes. “Unless Congress acts, we’re likely to see a huge exodus of doctors who will not accept either Medicare or Medicaid patients.” 

The New Health Law: Bad for Doctors, Awful for Patients
Jason Fodeman of the Galen Institute documents underpayments and perverse incentives in Medicare’s physician reimbursement regimen. Instead of reforming the government’s flawed reimbursement regimen, the ACA merely expands its scope to more people, Fodeman notes. 

The Obamacare Evaluation Project: Access to Care and the Physician Shortage
Paul Howard and Yevgeniy Feyman of the Manhattan Institute analyze changes in access to primary-care physicians under the Affordable Care Act. They found population growth, demographic changes, and an expansion of insurance spurred by Obamacare will contribute to a significant shortage in primary-care physicians over the coming decade. 

The Fourth Obamacare Shock Wave Is about to Reach Us
Jim Powell of the Cato Institute examines the Obamacare doctor shortage and argues one of the main reasons for the shortage is the fact government intervention generally is making it more expensive and difficult for doctors to do their jobs. 

Obamacare’s Impact on Doctors—An Update
In this Heritage Issue Brief, Alyene Senger outlines several effects of Obamacare on doctors: “Specifically, physicians will be subject to more government regulation and oversight, and will be increasingly dependent on unreliable government reimbursement for medical services. Doctors, already under tremendous pressure, will only see their jobs become more difficult.” 

Doctors Complain They Will Be Paid Less By Exchange Plans
Roni Caryn Rabin spoke with physicians about the effect of the new exchanges on reimbursement rates. From her series of interviews, Rabin, writing for Kaiser Health News,  estimates the rates reimbursed to doctors through the state and federal exchanges are far lower than for private commercial plans. 

Studies Show: Medicaid Patients Have Worse Access and Outcomes than the Privately Insured
In this Heritage Backgrounder, Kevin Dayaratna states it is becoming increasingly difficult for Medicaid patients to find access to primary and specialty care physicians. When Medicaid patients are admitted to hospitals, they are often admitted with more serious conditions than those with private insurance. By expanding this broken program, Obamacare will only exacerbate the situation, continuing to harm many low-income Americans who have no option other than Medicaid. Policymakers should reform Medicaid to allow Medicaid patients access to private insurance in a consumer-driven market, Dayaratna writes. 

ObamaCare Creating Two-Tier System
The National Center for Policy Analysis cites a Wall Street Journal article by Scott Atlas, a physician and senior fellow at the Hoover Institution, who argues the Americans most dependent on public insurance will have less and less access to medical care under Obamacare: “Reimbursement rates for Medicare and Medicaid are already low, a fact that has led doctors to refuse to treat those patients. With reimbursements falling even further, more doctors will begin to refuse those with government insurance plans.” 

Less than Half of Doctors in Nation’s Largest Cities Are Accepting Medicaid Now: Study
Writing at the Daily Caller, Sarah Hurtubise discusses a new survey from health care consulting firm Merritt Hawkins, which found just 45.7 percent of physicians are now accepting Medicaid patients in the nation’s largest 15 cities. The federal welfare program cuts costs by reimbursing physicians at extremely low rates, preventing many doctors from seeing patients with Medicaid coverage. 

Emergency Docs Expect Patient Influx, Lower Quality Care
Sarah Hurtubise of the Daily Caller reports emergency room visits have risen since Obamacare went into effect and more ER physicians expect the new law to hurt than help. 

Research & Commentary: The Medicaid “Cure”
Kendall Antekeier of The Heartland Institute examines the Medicaid Cure, a pilot program established in five large Florida counties by Gov. Jeb Bush, a premium support model in which 290,000 Medicaid recipients are given a range of premiums and plans from which to choose.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at  

The Heartland Institute is available to send an expert to your state to testify or brief your caucus, host an event in your state, or send you further information on this or any other topic. If you have any questions or comments, feel free to contact Heartland Institute Senior Policy Analyst Matthew Glans at [email protected] or 312/377-4000.