Feds' proposal could encourage cuts in Medicaid reimbursement, hurt rural hospitals and doctors' practices

A proposal from the Centers for Medicare and Medicaid Services to cut Medicaid rates without oversight could trigger soaring uncompensated-care costs and facility closures at hospitals and medical practices, Virgil Dickson reports for Modern Healthcare. The changes would especially hurt rural areas, which serve a higher proportion of Medicaid patients.

"The CMS in March suggested that states cutting Medicaid rates by up to 4 percent in one year or up to 6 percent in two consecutive years would not need to conduct an analysis to determine if the cuts harm access to care," Dickson reports. "Comments on the proposal were due Tuesday." The CMS said the proposed rule would reduce states' administrative burden and wouldn't likely diminish access to care.

Casey Dungan, senior vice president of the Tennessee Hospital Association, told Dickson that rural hospitals would suffer because they can't afford to leave managed-care networks and don't have the leverage to negotiate rates to cover the cost of providing care to Medicaid patients. Medicaid already has lower reimbursement rates than commercial insurance and Medicare, so rural hospitals are already dealing with thin or non-existent profit margins.

"The proposal also doesn't account for thin Medicaid patient margins for primary-care physicians," Dickson reports. "A primary-care physician's profit margin is usually less than 4 percent a year, which means they are just getting by. Even modest cuts would wipe those margins out, putting access to care at risk, according to Dr. John Meigs, board chair at the American Academy of Family Physicians."

Some states would also no longer have to assess how easy it is for fee-for-service Medicaid beneficiaries to receive primary care, pre- and post-natal obstetric care, and specialty and behavioral health care. Fee-for-service populations are the most vulnerable Medicaid patients, and are more likely to include people with disabilities and those who need long-term support, Dickson reports.