Mike Thompson over at the Thomas Jefferson Institute has some questions about Medicaid expansion. More specifically, he has a list of ten questions that he thinks should be further discussed as part of the ongoing debate that’s created a stalemate in Richmond. I won’t pretend to be qualified to give an expert answer to all of them – but there were two that I think some data might be able to shed some light.

They have to do with how many doctors accept Medicaid patients altogether. As Thompson asks:

If fewer doctors are taking Medicaid patients because the government’s reimbursement rates don’t cover the actual costs, how will expanding the Medicaid population do anything other than make this financial nightmare even worse?

Of course, the answer to this question not only depends on whether Medicaid gets expanded, but how the General Assembly (and Governor McAuliffe) decides to expand the program. There are currently two systems that the state government could decide to use for Medicaid expansion.

The first system is called fee-for-service, which is how disabled seniors receive care. Under fee-for-service, it’s as simple as a patient visiting a doctor and then paying at the office after the visit. This is how the majority of patients (in the nation) receive their medical care. There’s a reason why 30 percent of Virginia’s Medicaid population (the disabled seniors) consume over 70 percent of the overall Medicaid expenditures. FFS creates a perverse incentive for doctors, who are paid for the amount of care they provide patients rather than the quality of care.

As of 2013, about two thirds of Virginia’s current Medicaid patients receive treatment from a Managed Care Organization, which is designed to better coordinate medical treatment. The idea behind the MCO is that too many people are receiving non-emergency treatment in emergency rooms – burning up expensive medical services. When you receive your Medicaid treatment from a MCO, you’re care is better coordinated so that you receive preventative treatment, or other less costly treatments.


Graph provided by Virginia DMAS

A recent study by the Joint Legislative Audit & Review Commission explains how the MCO model might increase payments to providers and improve outcomes:

With regard to provider payments, there are several notable differences between the fee-for-service and managed care systems. Whereas [the Department of Medicaid Services] pays similar providers the same rate for a particular service, MCOs often negotiate rates with providers. When necessary to obtain services for Medicaid enrollees in their network, MCOs may pay rates that are significantly higher than the fee-for-service rate. Moreover, four of the six MCOs pay primary care providers an administrative or management fee of $1 to $2 per patient in addition to the base reimbursement rate, and MCOs sometimes make incentive payment to providers that achieve certain performance goals.

So while covering costs is an important piece of the Medicaid expansion conversation – it masks the real relationship between Medicaid payments and the cost of providing care. Under an MCO system, payments could be tied to reducing costs, benefiting providers, taxpayers and patients.


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