Medicaid Reimbursement Is Not Keeping Pace With Medicare

While Medicare reimbursement rates are consistent nationally, differing only by a geographic cost index, Medicaid reimbursement rates are determined by each individual state and are based on one of three factors: 1) a percentage of Medicare, 2) a market assessment structured by the state or 3) a relative value scale. In general, Medicaid reimbursement rates tend to be much lower — usually equaling only about 78% of Medicare reimbursement.¹ Further, the rates vary substantially across states and for specific procedures.

The lower reimbursement rate has contributed to reductions in provider participation in Medicaid, as reported by the Medicaid and CHIP Payment and Access Commission (MACPAC) in 2017. Specifically, 96% of providers said they were accepting new privately insured patients, 88% were accepting new Medicare patients and only 74% were accepting new Medicaid patients. Among some specialty groups, only 70% were accepting new Medicaid patients.²

Lower provider participation in Medicaid means that having insurance does not equate to having equal access to care. Continued degradation of Medicaid reimbursement will further diminish the already limited access to care that low-income patients in the United States currently face.

Knowing the Numbers

Given the importance of imaging reimbursement deficiencies in ACR advocacy, the ACR Government Relations team collected the past 10 years of state-level Medicaid and Medicare reimbursement rates for 10 common procedures of varying complexity. The Harvey L. Neiman Health Policy Institute® analyzed these data and created heat maps, now available on NeimanHPI.org.

The analyses served to verify the dire situation. Many states are severely deficient in their Medicaid reimbursement rates for professional fees. This was seen even among states with the highest rates of Medicaid enrollment, which means more than 25% of the state population, including Alaska, California, New Mexico, Arkansas, Louisiana, Kentucky, West Virginia, New York, Vermont and Washington, D.C.³

For instance, in Rhode Island, where 32% of the population uses Medicaid, the professional rates for Medicaid are only about two-thirds (64%) of the Medicare rates, whereas Medicaid rates in Wyoming are almost double Medicare rates (194%) in a state with only 12% Medicaid enrollment.

A more complex procedure with higher reimbursement, CT of the abdomen and pelvis, showed similar variance. In 2022, the Medicaid rate for this procedure in New York State (which has a 28% Medicaid enrollment) was 59% of Medicare’s rate, while Nebraska’s Medicaid program paid doctors 159% of the Medicare rate but had only about half the rate of Medicaid enrollment (15%).

Closing the Gap

For some procedures, the Medicaid-to-Medicare reimbursement gap seems to have grown wider over the last 10 years. In 2012, for instance, these rates were nearly equal for a single-view chest X-ray in Rhode Island, a ratio one-third higher than it would be in 2022 (0.64). For a more complex procedure, an esophagram with upper gastrointestinal imaging, states such as New York, Connecticut and Rhode Island are even seeing Medicaid professional reimbursement at less than half of what was paid by Medicare in 2022, while the same ratio for these states in 2012 was 0.54, 0.98 and 0.99, respectively.

In general, the majority of states are seeing shifts toward Medicaid-to-Medicare ratios of less than 1.00 for professional charges reimbursed for common imaging procedures, regardless of procedure complexity or cost.

Together, state and federal governments need to find a way to narrow the massive gap between Medicare and Medicaid reimbursement to improve access to care rather than just access to insurance. Although states do receive funding from the federal government to cover a majority of their Medicaid expenditures — and particularly so after the Medicaid expansion under the Affordable Care Act — Medicaid is ultimately a state-run program, and states determine reimbursement for specific services.

Medicaid expansion has resulted in increases in access to care, including higher rates of early-stage cancer diagnoses, which have led to fewer premature deaths in the U.S.⁴ Hence, while Medicaid expansion has been helpful, its potential impact is limited by its relatively lower reimbursement that may hinder access to care and create disparities across the states.

Although Medicaid oftentimes reimburses at a mere fraction of Medicare rates, it does provide a necessary lifeline for much of the U.S. population, allowing people to receive medical care when they otherwise would not be able to if Medicaid did not exist, even if the access to care it provides is more limited than for Medicare or commercially insured individuals. During the COVID-19 pandemic, for example, Medicaid served as a safety net for patients, when so many people who were laid off from their jobs lost their private or employer-sponsored health insurance and relied on Medicaid to access the care they needed. Medicaid enrollment rose 29% in the first 22 months of the pandemic, while employer-sponsored health insurance and other private plan enrollment dropped.⁵

It is time to level the playing field for providers who treat Medicaid patients and for patients who do not meet the eligibility criteria or cannot afford other healthcare coverage options. Not only will this ensure providers are being paid appropriately, but it will also facilitate access to preventive care, like cancer screening, for patients who so desperately need it.