Though health plans are seeing unprecedented growth from new customers signing up to expanded Medicaid coverage under the Affordable Care Act, a potential pitfall is on the horizon if Congress doesn't renew and reform a pay raise for primary care doctors.
A payment increase under the health law for primary care doctors that raised their payments for two years beginning in 2013 from the level of state-run Medicaid health insurance programs for the poor to the level of the federal Medicare health insurance for the elderly runs out at the end of this month.
It's been a financial windfall for doctors of more than 70 percent on average in reimbursement increases. It's also designed to increase the number of physicians who accept Medicaid patients and attract even more physicians to the growing insurance program and the insurers increasing their role in management of the nation's care to the poor.
It appears the only way to keep the Medicaid payment increase from beyond Dec. 31 of this year is an act of Congress. Therefore, doctor groups are urging Congress to support the "Ensuring Access to Primary Care for Women & Children Act," which currently is being pushed by Democrats in the U.S. House and U.S. Senate.
"Ensuring sufficient payment for primary care services and vaccinations, and to the physician specialties that deliver them, is essential to ensuring access for the 65 million women, men, adolescents and children enrolled in Medicaid," Dr. David A. Fleming, president of the American College of Physicians, which includes more than 140,000 internists, wrote to U.S. Rep. Kathy Castor, a Florida Democrat and sponsor of the legislation.
For health plans like Humana (NYSE: HUM), Aetna (NYSE: AET), UnitedHealth Group (NYSE: UNH) with growing Medicaid portfolios and more pure-play Medicaid plans like Centene (NYSE: CNC) and Molina (NYSE: MOH), the need for primary care doctors to be paid at the higher rate is important for maintaining robust provider networks.
The end of this Medicaid funding could also impact Medicaid rates directly paid to health plans because certain states have worked the extra money into a bundled payment to doctors and clinics with primary care providers over the last two years. Payments to health plans vary by plan and state depending on how contracts are structured between insurers and Medicaid programs.
One problem, however, that health plans want to see ironed out is that future Medicaid payment increases take into consideration that almost half of payment for primary care services goes through health plans. The payment increases woven into the ACA was largely based on fee-for-service payment and the implementation of the payments two years ago became a mess when formulas were worked out on how to pay health plans.
Medicaid Health Plans of America, which represents insurers contracting with the insurance program for poor Americans, said it "supports current payment enhancements made available for Medicaid primary care services by section 2012 of the Affordable Care Act."
"MHPA's support of an extension of this policy beyond 2014 is subject to further evaluation of studies showing the effects of the policy as well as the possible funding mechanisms," the association said.
Under the Affordable Care Act, primary care doctors – family physicians, pediatricians and internists – saw their average pay jump last year by more than 70 % on average though the rates vary from state to state, according to a 2012 Henry J. Kaiser Family Foundation study that is linked here. Doctors in some states saw their Medicaid reimbursement jump 100% or more.
Health insurance companies that contract with Medicaid programs need more doctors than ever in their provider networks given the health law expands coverage to millions of Americans in states that went along with the expansion. Meanwhile, the number of Americans enrolled in Medicaid and the Children's Health Insurance Programs that contract with private health plans is expected to soar by 13.5 million by 2016, according to a study last month by Avalere Health, a research firm tracking implementation of the Affordable Care Act.
"This legislation will extend and ensure continued funding of what is often referred to as the 'Medicaid Primary Care Pay Parity Program' under current law," Fleming wrote in his letter. "Maintaining access to primary care and related medical and pediatric subspecialists, by ensuring comparable rates under Medicare and Medicaid for these services, is especially critical at a time when the population enrolled in Medicaid is surging."
If the legislation doesn't pass yet this year, it's fate is less clear once Republicans hostile to President Obama's signature legislative initiative take control of the U.S. Senate and retain control of the U.S. House of Representatives. And less certainty for doctor pay and their participation in health plan networks could be unsettling to insurance company stocks.
Bruce Japsen has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.