Obamacare's Stick On Medicaid About To Get Real In 2013

Everyone is all fiscal cliff all the time this days, and there are plenty of rumors going around in the news media for everyone to blather over. But the fiscal cliff isn't the only thing happening on January 1.

Next year, some important provisions of the Affordable Care Act take effect, most of them meant to prepare for full scale implementation the following year, 2014. In nine Republican controlled states, their governors have refused to agree to the Affordable Care Act's Medicaid expansion, which would cover anyone under 133% of poverty under Medicaid. Their politics dictate that they refuse Obamacare's expansion, but their practicalities may soon intrude with that politics. That's what I want to talk about today.

You see, there are at least two sticks to make these intransigent governors and legislators swallow the medicine of Medicaid inside other provisions of Obamacare. The first, and the most potent is a little known provision that will provide new federal dollar to match Medicaid's physician and other medical reimbursement rates to that of Medicare. From a Kaiser report on the subject,
To help ensure sufficient access in Medicaid as enrollment increases, the health reform law requires states to raise their Medicaid fees to Medicare levels at least, for family physicians, internists, and pediatricians for many primary care services. Physicians in both fee‐for‐service and managed care environments will get the enhanced rates. The primary care fee increase, which applies in 2013 and 2014, is fully federally funded up to the difference between a state’s Medicaid fees in effect on July 1, 2009 and Medicare fees in 2013 and 2014.
Why is this important? Because doctors who see Medicaid patients are currently so poorly compensated that a study found that in 2011, nearly a third of doctors would not accept new Medicaid patients. In contrast, more than 80% of doctors would accept new Medicare patients. Why the disparity between Medicaid and Medicare patients? Well, that might be explained by the following map from the previously cited Kaiser study:

Obamacare solves this problem, by mandating - and providing funding for the mandate - that doctors seeing Medicaid patients must be compensated the same as those seeing Medicare patients. This has two far-reaching consequences. First, more physicians will take Medicaid patients, and in turn, demand that their states accept the Medicaid expansion, so that they can get more patients paying at the Medicare rate at the minimum.

But the second effect of this payment increase may well be the more potent weapon. Once Medicaid's payment rates match Medicare's, physicians who do take Medicaid patients won't feel compelled to make up for the low reimbursement rates from Medicaid by taking as many new patients as they can from higher-paying private insurance, which in turn adversely affects how many Medicare patients they can see. In other words, if they do not have to make up for Medicaid's underpayments with overpayments from privately insured patients, they may well be able to see more Medicare patients (and/or reduce their reimbursement rates for those private patients).

It isn't just doctors, either. Many primary care services, such as screenings, blood draws, x-rays are often provided at hospitals, who will see a higher reimbursement rate as well. Bottom line, the new Medicaid reimbursement rates for physicians and primary care will make physicians more likely to see those patients, and for those patients to be treated early before they have a preventable medical emergency.

And what do you presume is going to happen when in the middle of 2013, a whole bunch of physicians, who by then became accustomed to being fully compensated under Medicaid, tell their states, what do you mean you're not going to take the Medicaid expansion? We want to see more patients who can reimburse us at Medicare rates! What happens when hospitals come to them and say, Hey, take the damn expansion because we hate having to eat the cost for uncompensated emergency care?

So that's one.

What's the other stick? The year 2014 itself, of course. It's an election year. Somehow, it might not make a whole lot of sense to say to the voters that you won't expand Medicaid because it makes your state spend more money even though:

  1. The federal government covers all the costs of the expansion at that point (and 90% perpetually from 2017 on).
  2. The state will save a ton of money by not having to provide uncompensated emergency care to patients who will have primary care and thus be able to avert such emergencies.
  3. Your state's doctors and hospitals will be better compensated and have new business.
In 2014, all the stars align against Republican dogmatism on health care. It's reality, it's the law, and all of a sudden, the debate turns from why it is such a horrible terrible socialist plot to eat America's unborn children to "Hey, why the f*ck is my state sacrificing all this stuff in dollars and public health?" and "Hey, why is California taking the money we are leaving on the table?" Suddenly, health care reform is not a caricature anymore. It's real, and it's election year reality.

Even the "principled opposition" to providing government sponsored health care won't work. Every single state out there already has a Medicaid program. This is not something radically new. It is simply an expansion of an existing program to cover the poor and reduce the cost of uncompensated care. An expansion not only fully funded but one that actually saves the state money.

What the Republicans really fear is not that the Medicaid expansion will prove costly for their states - it clearly won't. What they really fear is that it will work. It will work and gain acceptance in the mainstream. It will work and some states will start experimenting with expanding it even beyond the federal mandate. Some states will start letting their residents of whatever income buy into their state's Medicaid program by paying a premium. And if they do, people in these Republican states will be asking why they can't do the same. I mean, what is more market driven than letting people decide which insurance their money goes to buy?

When the Republican states first launched the legal case against Obamacare, I could not understand for the love of God why they went after the Medicaid provisions. It was clearly Constitutional. I get it now. They wanted to kill the Medicaid expansion in its nascent form, before it - and with it the idea of public health insurance programs for non-seniors - would become mainstream. There, my fellow progressives, is your real public option.

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