The ACA Will Temporarily Shield Some Medi-Cal Providers From the State’s 10 Percent Cut

Doctors, dentists, and other health care providers who participate in Medi-Cal (California’s Medicaid program) are bracing for — or have already felt the impact of — a 10 percent payment cut that the state has begun implementing, as we reported last month. However, thanks to the federal Affordable Care Act (ACA), this reduction will not apply — at least through the end of 2014 — to many primary care services provided by family physicians, internists, and pediatricians. In fact, these physicians will see a substantial increase in their Medi-Cal payments starting this fall. This is because the ACA requires states to boost their Medicaid payments to the federal Medicare level for nearly 150 primary care services during 2013 and 2014, with the federal government paying the entire cost of the increase. (This increase applies to services provided on or after January 1, 2013, but the state’s implementation has been delayed. Therefore, doctors will receive retroactive payments for qualifying services provided since the beginning of this year.)

This payment boost is welcome news for primary care physicians who participate in Medi-Cal, since they currently receive exceptionally low reimbursement rates relative to their peers in other states. California’s Medicaid payments for ACA primary care services were the third-lowest in the US in 2012, when measured as a percentage of Medicare payments for the same services (see chart). Once the ACA rate increase takes effect, California’s Medicaid payments for primary care services will more than double, rising by an average of 136 percent, according to the Kaiser Family Foundation.

Based on state estimates, the ACA increase will bring an additional $1.2 billion in federal Medicaid funds to California during the 2013-14 fiscal year — dollars that will support the work of primary care physicians who serve very-low-income Californians through the Medi-Cal Program. Moreover, because primary care doctors are largely shielded from the payment cut that the state is currently rolling out, they will receive roughly $250 million that they otherwise would have lost during 2013-14, with half of these dollars coming from the federal government and the other half from the state. Taken as a whole, these additional dollars, although temporary, could help to boost primary care doctors’ participation in Medi-Cal as the state prepares to implement a major expansion of the program in January 2014.

Still, it’s worth bearing in mind that the Medicaid payment increase is set to expire at the end of 2014. At that point, primary care doctors not only would lose the temporary rate bump provided by the ACA, but also would be fully subject to the rate cut that the state is currently phasing in. Such a steep drop in payments could cause at least some primary care physicians to rethink their participation in Medi-Cal in 2015. In order to head off that possibility — and provide greater fiscal certainty for other Medi-Cal providers — state policymakers should consider repealing the 10 percent cut for all providers as part of next year’s budget debate.

— Scott Graves