Medicaid Physician Compensation Supply of Medical Services

Effect of Physician Reimbursement Rates on Medicaid Take-up

Only about 50% to 60% of individuals eligible for Medicaid actually take-up the coverage.  Why is this case?  Many people claim that individuals only take up Medicaid insurance when they get sick.  Others claim that state outreach efforts have been subpar.  Youjin Hahn, however, offers another explanation rates: Medicaid insurance is just not that valuable.

The previous literature on the determinants of Medicaid take-up has largely focused on the cost of enrolling in public programs. This current study departs from the previous literature by focusing on how the value of Medicaid affects take-up. In particular, I examine the relationship between take-up and patient access to care, using the Medicaid-to-Medicare fee index as a proxy for access to care provided by Medicaid. Historically, Medicaid reimbursement levels for physicians are low. As a result, physicians are not incentivized to treat Medicaid patients, and this creates access-to-care problems for this group. In fact, 20 percent of pediatricians in the United States do not see Medicaid patients at all, and 40 percent limit the number of Medicaid patients in their practice. All else being equal, increasing the Medicaid payment to physicians would lead to a higher participation rate among physicians

Hahn uses information collected by the Urban Institute to calculate the ratio of Medicaid to Medicare payment rates. Medicaid take-up rates are measured using the March Current Population Survey (CPS). The sample is limited to children whose households fall below the poverty line.

Hahn finds the following results:

…an increase in the Medicaid-to-Medicare fee index by 10 percentage points (about a half of standard deviation of the fee index) is associated with a decrease in the uninsured rate by 1.24 percentage points within the low-income population. As about 41 percent of the 9 million uninsured children are in poverty (and thus eligible for Medicaid), the finding indicates that a 10 percentage point increase in fee payments would lead to a reduction of about 45,800 low-income uninsured children.


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