Docs Don't Want to Fight With Medicaid to Get Paid

By Hannah Neprash, PhD
September 3, 2021

Hannah Neprash is an assistant professor in the Division of Health Policy & Management at the University of Minnesota’s School of Public Health. Her research focuses on how clinician decision-making responds to incentives, in turn affecting utilization, spending, access and quality of care. 

Why don’t doctors treat more Medicaid patients? While most doctors treat at least one Medicaid patient, Medicaid patients typically make up just a small share of their overall patient population. The usual explanation is, “It’s the prices, stupid!” State Medicaid programs are well known for almost always paying less (sometimes a lot less) than Medicare or commercial insurers do for the same health care services.

new NBER working paper by Abe Dunn, Joshua Gottlieb, Adam Shapiro, Daniel Sonnenstuhl and Pietro Tebaldi offers another reason why doctors may avoid Medicaid patients: It can be a real pain in the butt to get paid. The authors used what’s known as “remittance data” from 2013-2015, which captures the back-and-forth between providers and insurers haggling over how much providers will get paid, or if they’ll get paid at all. This allowed them to track what happened to claims that doctors submitted to Medicaid (or the managed care organizations that run many state programs)for services rendered. 

They found that 25% of Medicaid claims had payment denied for at least one service. Compare that to a denial rate of 7.3% for Medicare and 4.8% for commercial insurers. Of course, some of those initially denied claims eventually got paid, but it took time and effort on the part of doctors (or their billing departments) to get there. The authors calculated that providers lost, on average, 17.4% of Medicaid claim value due to the combination of partial or denied payment and the cost of resubmitting claims. That’s compared to 4.9% in Medicare and 2.8% in commercial insurance.

Unsurprisingly (but worryingly), the researchers found the more doctors expect to lose because of Medicaid administrative hassles, the less likely they are to treat any Medicaid patients. They tested this by studying doctors who moved from one state to another and group practices that span multiple states. Both analyses show that doctors in states where it’s harder to get paid by Medicaid were less likely to treat Medicaid patients. But here’s the kicker: They found that administrative hassles had effectively the same impact on doctors’ willingness to treat Medicaid patients as did payment rates.

So would doctors treat more Medicaid patients if getting paid was less of a hassle? Maybe. Past efforts to increase Medicaid acceptance by raising payment rates have yielded mixed results. But it does seem like there’s a potential win-win-win here. If state Medicaid programs simplified the billing process: 1) Cash-strapped state Medicaid programs might have an easier program to administer (and interestingly, claim denials were less common in Medicaid managed care than fee-for-service Medicaid programs), 2) doctors might be more likely to receive payment for services rendered to Medicaid patients, and 3) those patients might have better access to care. Because at the end of the day, insurance coverage is only meaningful if you’re able to access the care you need.

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