A typical anesthesia practice payer mix consists of five primary categories of payer: contracted commercial insurance plans, Medicare plans, Medicaid plans, non-contracted insurance plans and patients with no insurance, which sometimes includes pre-paid cases for cosmetic cases. Providers tend to view these as rungs on the payment ladder where each category reflects a unique payment rate and mode of payment. Contracted commercial plans such as Blue Shield, Blue Cross, Aetna, Cigna and United Healthcare have the best rates and are the primary source of revenue to the practice. Medicare plans cover a very large percentage of claims, often 30 to 50 percent, but the payment is significantly discounted—usually less than half of the average commercial rate. Medicare payment processing is consistent and predictable because Medicare is a national health plan while Medicaid payments vary by state and are subject to a variety of state-specific rules and regulations. Typically, Medicaid rates are less than those for Medicare claims. Because of the low payment rates and processing inconsistency, providers tend to lump Medicaid and self-pay together as the worst payers, occupying the bottom rung of the food hierarchy.
What Medicare and Medicaid have in common is that their rates are non-negotiable. CMS adjusts Medicare rates once a year and adjustments are either flat or downward. Medicaid rates tend not to change. Many years ago, the New York Medicaid rate was adjusted from $5.00 a unit to $10.00 and has not been adjusted since. Many states have used managed care plans to enhance the cost effectiveness of Medicaid programs. Arizona is a good example of this with its AHCCCS (Arizona Healthcare Cost Containment Service). The fundamental challenge that Medicaid plans face is utilization. Because the plans cover indigent patients with few other healthcare resources, they tend to be expensive to manage. Ten percent of New York City patients are covered by Medicaid who use the emergency room for most medical care.
When it comes to anesthesia, payment rates are determined based on the overall economics of the plan and the state budget. Budgetary deficits, such as was the case in California, can result in temporary rate cuts. As a result, the net yield per Medicaid unit is sometimes less than the published rate, even though there is no deductible or co-payment.
There is speculation among some that changes could be on the way in the nation’s capital that would have an impact on the current Medicaid program. Among these are the following:
- Repealing or weakening Obamacare
- Capping and cutting Medicaid financing
- Restricting Medicaid eligibility
If these changes come to fruition, there would, at the very least, be short-term disruptions in the present levels of care and payment. Many patients would face new limitations to their current access to health coverage, and healthcare providers would have even lower reimbursement coming in from their Medicaid cases. One could make the argument that your worst payer would be getting even worse.
We’ll have to wait and see what the new Congress and incoming Health and Human Services secretary will be proposing and passing in the upcoming weeks and months before we can have a clearer assessment of the future of Medicaid.