Reimbursement rates dropped Jan. 1 for Medi-Cal primary care providers in two ways:
- A provision of the Affordable Care Act temporarily set primary care reimbursement rates at Medicare levels, significantly higher than Medicaid payments. The increase lasted two years and expired on Jan. 1.
- A state reduction in Medi-Cal reimbursement for primary care providers hit on the same day. The 10% rate cut, approved by the California Legislature in 2011, was held up while the matter was thrashed out in court. Last year, the courts upheld the state’s right to reduce provider reimbursement and health care officials decided to implement the cutbacks in phases. The last phase, which includes primary care providers, went into effect Jan. 1.
The federal drop is much more precipitous, but it’s the combination of the two rate decreases that has Francisco Silva concerned. Silva, vice president of legal affairs at the California Medical Association, said primary care providers who see a lot of Medi-Cal patients will have to scale back or stop seeing those beneficiaries.
“That’s about 60% less, when you combine both cuts,” Silva said. “We’re very concerned. It’s really concerning for the sustainability of those practices with a large Medi-Cal patient base. When you look at the financial solvency data … there’s a strong correlation between solvency and patient load.”
Since providers lose so much on each Medi-Cal patient, they can’t afford to care for too many of them, Silva said.
“These cuts will have a devastating impact on the ability of doctors to see those patients,” he said.
State health officials have said they’re taking the necessary steps to make sure enough providers continue to care for Medi-Cal patients, according to Anthony Cava, information officer at the Department of Health Care Services, which oversees the Medi-Cal program.
“DHCS has not encountered significant Medi-Cal patient access issues in the fee-for-service program, and we are continually monitoring access to ensure members are able to receive care,” Cava said. “If access issues are identified, DHCS takes measures to resolve the issues, which could include revisiting the provider payment reductions. Similarly, in our managed care program, DHCS has not encountered significant issues with network adequacy.”
According to UCLA researcher Dylan Roby, there may not be an immediate drop in the number of Medi-Cal providers, but a gradual decline is likely.
“The federal reduction, that’s a pretty significant change. The [primary care] providers are getting the higher rate, so they’re the ones who are going to feel it the most on Jan. 1,” Roby said. “When they now realize what Medi-Cal actually pays, that’s a pretty significant change.”
No one knows the impact of the cuts, Roby said, but he said he could hazard a guess.
“I don’t see a huge change immediately. But anytime you see a downward movement in rates, provider involvement can drop,” Roby said. “There are certainly side effects with a rate reduction like this. Just like you saw a bump up in provider involvement when there was the rate bump, you’ll see something similar [the other way] if you cut.”
Reductions Hit Managed Care Differently
The state cut hits fee-for-service providers a little differently than providers under Medi-Cal managed care.
According to DHCS officials, the state now has about 80% of its Medi-Cal beneficiaries under managed care plans. Those managed care providers aren’t directly reimbursed by Medi-Cal — they’re reimbursed by health plans — so the bulk of providers in California won’t feel the 10% cut directly.
But health plans will, said Nicole Kasabian Evans, vice president of communications at the California Association of Health Plans. The 10% cut will include the “actuarial equivalent” amount in payment to managed care plans, according to state officials.
Evans said the cut is really just part of a larger issue, since California already had some of the lowest Medicaid reimbursement rates in the nation even before the latest reduction.
“To properly serve this population, we need to address the underfunding of Medi-Cal,” Evans said.
When Medi-Cal is underfunded, she said, providers rely more and more heavily on private-pay insurance to basically subsidize the low public-pay rates.
“The cost shift is dramatic,” she said. “We have some of the lowest reimbursement rates in the nation. We’re not keeping pace for those reimbursements. We need to start the discussion to start to … make progress in the other direction.”
That will be a dicey conversation to raise in the Capitol Building, since the expansion of Medi-Cal to millions more Californians equates into more dollars committed to Medi-Cal overall, even if the rates are lower than the rest of the country.
More than 11 million Californians are on Medi-Cal — more than 30% of the state’s population. Raising rates by any amount, given that huge pool of recipients, would be an expensive proposition.
Evans said that may be true but increases are necessary because the system will break if too much torque is applied to the private health insurance industry.
“We can’t go backward any longer,” she said.
Roby said the reimbursement reductions to Medi-Cal managed care plans likely will eventually sift down to the providers.
“It’s possible the health plans could potentially say, ‘We need a robust workforce and we can’t just pass on this reduction.’ But it certainly would put downward pressure on rates. If fee-for-service rates are lowered, so go capitated rates,” Roby said.
“We know overall, it will filter down to all providers, but it might not be at the same level,” Roby said.
Direct Cut for Fee-for-Service Providers
For fee-for-service providers, many already working on a thin margin, the 10% cutback could tip them into insolvency, Silva said.
Although fee-for-service providers are most directly affected by the cut, the state is looking at a potential access nightmare on the managed care side, Silva said.
“Under fee-for-service we can go to the state and say, ‘We need access.’ Now they’re referring us to the plans, saying it’s their responsibility,” Silva said.
“That 10% cut is going to have a significant effect over the long run,” he said. “Patients are going to have to wait months, and travel farther, to get the care they need.”
Silva said Congress instituted the two-year bump in primary care provider reimbursement rates after a lengthy investigation. “They concluded the Medicare rate is the sweet spot, where providers aren’t losing money,” Silva said. “That’s what they concluded with the primary care rate bump.”
Silva predicted health plans’ provider networks likely “will get even skinnier.” Providers already lose money with Medi-Cal patients, and now they’ll just lose a little more — and likely see fewer of them, he said.
“The state’s approach has been to wait and see, to wait for something bad to happen,” Silva said. “This will definitely have an impact on some physicians. Some will continue, some will not, some will stop seeing new patients, some will close their practices, some will practice in a different environment. But yes, you will see an effect, that’s definite.”
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.Some elements may be removed from this article due to republishing restrictions. If you have questions about available photos or other content, please contact khnweb@kff.org.