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Medicaid: A Band-Aid for Patients

and Providers
6 Reasons Medicaid Isnt Working

By Lamon Willis CPCO, CPC-I, COC, CPC

Director of Business Development | Healthicity


The Program is now 50 Years Old

On July 30, 1965, President Johnson
signed the Social Security Amendments
which established Medicare and Medicaid,
promising that they would improve a wide
range of health and medical services
for Americans of all ages. Medicaid was
designed as a welfare program to provide
healthcare services to vulnerable low-income
groups. Medicaid is jointly financed by
federal and state governments. The program
is now 50 years old, giving us plenty of time to
reflect on where weve gone wrong.

Because the program is supposed to improve
access to health and medical services, we
should see marked improvement in this
area. However, the court case Armstrong v.

Exceptional Child Center buried any illusion

that Medicaid Expansion will improve access
to healthcare. In a 5-4 decision, the U.S.
Supreme Court barred doctors, dentists and
pharmacists from suing states for allegedly
curtailing reimbursements for care they
provide to Medicaid patients. Although the
ruling doesnt directly impact Medicaids
promise to provide quality care for the poor,
fulfilling that promise requires a wide and
accessible network of physicians. By this
metric, Medicaid hasnt fulfilled its pledge
for years and the Supreme Court made it
With a bloated and ever growing-budget,
this government program has consistently
displayed an inability to provide quality
healthcare. And, in spite of its failing record,
many state legislators continue annual
attempts to expand Medicaid year after year.
An excellent example of this is the court
case of Armstrong versus Exceptional Child
Center in the state of Idaho. In this case, the
plaintiffs alleged that the state of Idaho
violated its pledge to provide Medicaid in a
manner which:

assure[s] that payments are consistent

with efficiency, economy and quality of
care and are sufficient to enlist enough
providers so that care and services are
available under the plan.
In 2005, the Idaho state legislature
passed a law that increased Medicaids
reimbursement rate for physicians, however,
the state lacked the finances to pay the new
rates. The legislature failed to raise rates
as promised and so the Exceptional Child
Center and another home health-care
provider sued the state for failing to comply
with Medicaids pledge to make payments
that are consistent with the quality of care.


The Supreme Court Justice Antonin Scalia

penned the majority decision and part of
what he noted was:
It is difficult to imagine a
requirement broader and less
specific than Medicaid for state
payment plans. Given that this
pledge is so vague, Justice Scalia
and four other justices said that
only the Department of Health and
Human Services (HHS) could decide
which state Medicaid program met
these criteria, through the traditional
regulatory review process.

The Supreme Court also worried that if they

decided in favor of the Exceptional Child
Center, they would create a precedent,
allowing physicians, hospitals, and other
healthcare providers to sue every time they
felt that the states Medicare payments were
The plaintiffs were spot on about Medicaids
reimbursement rates. Idahos Medicaid
program reimburses hospitals 88% of what
Medicare pays. While Medicare is estimated
to reimburse hospitals on average about

80% of what private insurance pays, Medicaid

reduces payments year after year with less
physicians and other healthcare providers
lining up to take Medicaid patients. However,
Medicaid reimbursement throughout the
country is not anything like what Idahos rates
To make matters worse, the department
of Health and Human Services (HHS) has
routinely expanded the list of procedures
that states must reimburse under Medicaid
and softened eligibility for the program.
Because the Medicaid programs financial
obligations have ballooned like a farm pig,
most states in the country are compelled to
cut their reimbursements to physicians and
Another example can be seen in the state
of Wyoming. The costs of the Medicaid
program began to cannibalize money from
other programs within the state budget and
since 2009 the cost of Medicare increased
by 4% yet the funds to support it had only
increased by 1%. Even when a state rejects
the ever increasing expansion of the program,
it will continue to consume a growing share
of the budget.

After the Supreme Courts ruling reaffirmed

HHS as the Lone Ranger-judge of state
compliance with Medicaids mandate,
physicians and patients have even less legal
standing to oppose and prevent future cuts
in the programs reimbursements. Along with
that fact, all states now have more freedom
to decrease reimbursements as the Medicaid
programs costs continue to grow.
A valuable lesson can be learned with this:
goods and services that governments provide
are entirely dependent upon the capacity of
taxpayers to pay for them. And when state
governments run out of taxpayer dollars, they
fold like a cheap suit on their promises.

For individuals who are Medicaid eligible
and require care, it can be very frustrating
to obtain treatment. Why? Decreasing
opt-out example, this patients plight from a
miscellaneous post online:


I have called every pediatrician that

will take Medicaid in my area and
every single one says they are not
accepting new Medicaid patients. And
even though my deceased husband
has our son under his commercial
insurance they still will not accept him
as a patient because of the Medicaid.
So what are we supposed to do, not
have a pediatrician for a year and
hope for the best? I am so frustrated.
Now I would have rather paid for all
my pregnancy visits out of pocket if it
meant my son could have a doctor

A 2011 nationwide survey of physicians

reported that 31% were unwilling to accept
new Medicaid patients, with acceptance
rates across states varying widely. Across
the country it was estimated that 69% of
physicians were accepting Medicaid, but state
acceptance rates varied from a low of 40%
(New Jersey) to 99% (Wyoming) according
to the study published in Health Affairs.
As of 2014, these numbers have changed
to around 47% of physicians willing to accept
new Medicaid patients. However, this variance
is only likely to wax and wane slightly by

state, as budget money is available for the

program and as physician patient volumes
allow for new indigent populations through
their doors.
Adding worse news to bad is the fact that
50% of the physicians listed as Medicaid
providers ARE NOT really accepting
Medicaid at all. According to the December
2014 Access to Care Provider Availability in
Medicaid Managed Care report by Office of
Inspector General (OIG): Half of providers
could not offer appointments to enrollees.
More than one-third of providers could not
be found at the location listed by a Medicaid
managed-care plan. In these cases, callers
were sometimes told that the practice had
never heard of the provider, or that the
provider had practiced at the location in the
past but had retired or left the practice. Some
providers had left months or even years
before the time of the call.

Over a 25% of providers had wait times of

more than one month, and 10% had wait times
longer than two months.

These types of problems only serve to

reinforce problems and perceptions with
the Medicaid program for both providers
and patients, but patients are the ones left
holding the healthcare bag in terms of their
For example, the report said, a number of
obstetricians had wait times of more than
one month, and one had wait times of more
than two months for an enrollee who was
eight weeks pregnant. Such lengthy wait
times could result in a pregnant enrollee
receiving no prenatal care in the first
trimester of pregnancy.

Medicaid pays, in some cases, pennies on the
dollar for healthcare services. While this
may sound very socially lovely and altruistic
it cannot support the provider delivering the
care. I have personally been amazed at
the rates in the past, wondering how any
hospital or physician can possibly afford
to have a high number of indigent patients


and stay in business without multiple grants,

federal funding, state funding, and maybe
finding a pot of gold at the end of a rainbow
somewhere. However, one blogger recently
noted how extreme it can be in a post. He
quotes Val Jones, MD, stating:

A physician friend of mine posted a copy of her Medicaid

reimbursement on Facebook. Take a look at the charges compared
to the actual reimbursement. She is paid between $6.82 and $17.54
for an hour of her time (i.e. on average, she makes less than minimum
wage when treating a patient on Medicaid). The enthusiasm about
expanding Medicaid coverage to the previously uninsured seems
misplaced. Improved access to the healthcare system via Medicaid
programs surely cannot result in lasting coverage. In-network
physicians will continue to dwindle as their office overhead exceeds
meager reimbursement levels. In reality, treating Medicaid patients
is charity work. The fact that any physicians accept Medicaid is a
testament to their generosity of spirit and missionary mindset.
Expanding their pro bono workloads is nothing to cheer about.
The Affordable Care Acts signature accomplishment is tragically
flawed because offering health insurance to people that physicians
cannot afford to accept is not better than being uninsured. After
all, improved access to nothing offers nothing. Inviting physicians to
work for less than minimum wage so that politicians can crow about
millions of uninsured Americans now having access to healthcare,
is ridiculous. Medicaid expansion is widening the gap between the
haves and the have-nots. The saddest part is that the have-nots
just dont realize it yet.


No one who is trying to make money in their

career is willing to take little or no money for
their services for long without examining
what can be improved to alleviate the drain
of their wallet. After all, they have staff to
support, bills to pay, and families of their
own which likely rely on the income. Not to
mention, after eight years of medical school
the college loans probably feel like a crushing
weight that only Atlas would be able to carry.
If you think this only impacts physician offices,
think again. Consider the problems with the
pharmaceutical industry. The mood of the
pharmacy industry in 1965 was obviously
much different than today since most
pharmacies were not huge corporate entities,
instead, they were locally owned and sourced,
catering to cash-wielding customers. The
Medicaid volumes for most pharmacies
would be very small in proportion to their
majority customer base, therefore, a smaller
percentage of profit to help the less fortunate
was not a great concern for the majority
of pharmacies owned across the country.
And while the new forms, processes, and

government bureaucracy for reimbursement

was a hassle, many pharmacists believed
that with this government program they
would be paid the fair Average Wholesale
Price (AWP) and their dispensing fee. One
pharmacist commenting on this subject
states the following:
The AWP was initially intended to represent
the average price at which wholesalers sold
their prescriptions to pharmacists. But it
quickly became evident that it did not build
in discounts, rebates, and other incentives. It
didnt take long for payers to start chipping
away at the AWP. In hindsight, maybe the
AWP was a little overinflated, but it was
the best we had to work with. What really
bothered me, and I think the majority of
pharmacists today, is that while the AWP
was often not the actual price pharmacists
paid for their drug products, nobody knew
what the actual AWP really was. Despite this,
third-party payers started to discount it
with apparent disregard for current market
indicators. It is a lot like buying a car. You
really dont know what the dealer paid for
it, but you know it should be discounted
because it is assumed the dealer paid lower
than the sticker price; but you really dont
know how much lower. The only difference
is that a car dealer would let you walk out

the door if their profit goal was not met;

pharmacists who dispense life-saving
prescriptions cannot do this because of their
contractual relationships with third-party
vendors, including the U.S. Government.
Now, 50 years later, there is the same debate
over a fair reimbursement price, only the
terms have changed. The new term is Average
Manufacturer Price (AMP). However, the
problem is much more severe. Cash customers
no longer exist in bulk and most pharmacies
are owned by corporations whose profits
have plunged over the last 50 years with
Similarly to what happened 50 years ago with
AWP, the discussion now involves applying
AMP only to Medicaid prescriptions. Its likely
that over time commercial insurers will follow
the governments example and just like it
happened in the past, no one will be able to
adequately and accurately calculate the AMP.


In 1965, just like today all chatter about

AMP only focused upon the cost of the
pharmacy product without considering the
value pharmacies and pharmacists bring
to healthcare. What would the industry
look like with a huge shortage of qualified
pharmacists to fill prescriptions? Will we
lower the standards of prescription support
by tasking unqualified staff which dont know
the nuances of pharmacological mixing,
matching, dosage requirements, and drug

Most children raised in America are given
some small monetary token when they lose
their baby teeth. The tooth fairy comes
to visit while theyre sleeping and leaves a
coin or bill under their pillow. Then, the next
morning the child is amazed and once again
ready to go buy candy to lose more teeth. In
essence, the tooth fairy is a positive idea
that can inadvertently cause negative
consequences. In a way, like Medicaid when
it comes to dental care.

In a 2012 Frontline video report called Dollars

and Dentists, its reported that millions of
people end up in emergency departments
and not the dentists office as a result of
dentists opting-out of Medicaid. In the film,
one example involved a child with severe
dental pain. Her teeth were so infected that
the side of her cheek was burning hot to the
touch. For two years her grandmother tried
to get her care and contacted ten different
dentists for appointments but no one would
see her.
Medicaid payouts for dentists are fixed stateby-state. For example, the state of Florida
offers one of the lowest reimbursement rates
in the nation. As a result, in 2012 only 10%
of Floridas dentists were willing to accept
Medicaid. Which means that only about
25% percent of Medicaid-eligible children in
Florida actually see a dentist.
And it doesnt seem like much has changed.
An organization called Oral Health American
(OHA) published a new study in April of this
year entitled State of Decay involving dental
care nationwide related to older adults.
From 2008-2010 there were 4 Million
emergency department visits for dental
care by older adults without dental

The dental treatments were found to be

10 times more expensive than routine care
when performed in the hospital,
A total of eight (8) states in the country
which have no type of coverage for dental
services, and only four (4) states which
cover all dental services.
With the dental workforce facing huge
retirements, as of July 1, 2016, Florida is
the second neediest state for dentists in
the nation. All of the data that each state
legislature is working from is related to 2012.
Therefore, things are only worse, not better.
Medicaid has never adapted to the need
for coverage of dental services in any
meaningful manner. Since its left to each
state individually to decide coverage policy
for the dental services under Medicaid, its no
huge priority. The tooth fairy strikes again,
like medicaid, hoping to deliver something
good, but accidentally creating new or
different problems in the meantime.


Medicaid does not provide healthcare directly.
Instead, it pays hospitals, physicians, nursing
homes, managed care plans, and other
healthcare providers for covered services
that they deliver to eligible patients. Hospitals,
physicians, and other healthcare providers
are not required to participate in Medicaid,
and not all do.
About two-thirds of all Medicaid spending
on services pays for acute-care services
such as hospital care, physician services,
and prescription drugs; another 30% pays
for nursing home and other long-term care
services and supports. Medicaid covers more
than 60% of all nursing home residents, and
it pays 40% of the nations total costs for
long-term care services and supports.
Medicaid also reimburses certain hospitals
for the uncompensated costs they incur when
they care for low-income uninsured patients.
These payments, known as Disproportionate
Share Hospital (DSH) payments, account

for about 4% of Medicaid services spending.

These figures do not include administrative
costs, which equal roughly 6% of total
Medicaid spending.

Federal rules require state Medicaid

programs to cover certain mandatory
services, such as: physician, midwife, and
certified nurse practitioner services; inpatient
and outpatient hospital services; laboratory
and x-ray services; family planning services
and supplies; rural health clinic/federally
qualified health center services; nursing
facility and home healthcare for adults over
age 21; and Early and Periodic Screening,
Diagnostic, and Treatment (EPSDT) services
for children under age 21. The EPSDT
guarantees that enrollees under age 21
have access to medically necessary services,
regardless of whether the states Medicaid
program otherwise covers these services.
States can cover certain additional services
as well. Some examples include prescription
drugs, dental care, vision services, hearing
aids, and personal care services for the
elderly and people with disabilities. These

services, though listed as optional, because

states are not required to provide them,
are critical to meeting the health needs of
Medicaid beneficiaries.
While all of that might not seem problematic
for everyone, it does get a lot more
complicated. What if the company you work
for does business across a tri-state area? Or
what about vendors who provide consulting
and software services nationwide? Coming
up with adequate answers and conclusions
from state to state is akin to trying to juggle
20 cats while riding a unicycle uphill in a


Consider that not all state governments

are speedy in their decisions to fund the
Medicaid program and/or institute updates
to the program as mandated by the Federal
government in a timely manner. But, the
Federal government is also considering ways
to utilize the Medicaid program to help
the homeless populations on a state-bystate basis. How would that work? State
legislatures are already balking at spending
more, expanding the program, and rejecting
money from the federal government. When
theyre told that now they have to help take
care of the homeless, theyre going to be
screaming, where does the madness end?
Theres only so much tax money to throw at
such a massive idea.

The state of California, like a country itself,
has a Medicaid program called Medi-Cal.
And of course it is vastly different from any
other state program with its own unique rules
and regulations, manuals, and way of doing
business. For many years the physicians
associated with the program were not

required to properly report their evaluation

and management (E/M) services, or code
according to official American Hospital
Association (AHA) ICD and American Medical
Association CPT guidelines.
Coverage programs with this program are like
something out of a science fiction movie. For
example, if you are unemployed and covered
by Medi-Cal you can have your healthcare
services paid for. However, because you
have coinsurance and deductibles similar
to private insurance, you may not be
able to afford the care. Did you think that
having health insurance means you have
healthcare? Think again! Also, the state has
the same problem with certain physicians
accepting Medi-Cal and seeing patients on
the government services roll. If they do, the
primary care physician youve been assigned
to is so far away its unreasonable to see
What about the fact that this program
supports managed care plans under its
umbrella? It purports to coordinate benefits
and provide care across multiple healthcare
entities but it has been found that the
provider directories are full of errors, like
black hole in outer space, and nothing is
verified in the plans submitted to the state.

Next is the point that many Californians with

private healthcare insurance have been
switched to Medi-Cal. Why? If your income
changes in the state and you no longer
are eligible for the private plans, you are
automatically switched to Medi-Cal. This
move has angered many residents who
found out the hard way about the change in

The Affordable Care Act provides subsidies

to offset private insurance costs for those
who make a certain amount above the federal
poverty level: From about $16,000 to about
$46,000 for an individual. Those who earn
less qualify for low- or no-cost Medi-Cal
insurance; they are ineligible for subsidized
private insurance.
A person who begins with a subsidized private
plan loses his eligibility for that subsidy if his
income falls to a level that qualifies him for
Dana Howard is a spokesperson for
Covered California and says, If someone is


re-determined to be eligible for Medi-Cal,

they are given a notice about it and their
coverage is taking effect immediately.
Others say they may have been misclassified
for a different reason based upon their
estimated income for the year. A disconnect
can easily occur when Covered California
tries to confirm the information. In the
absence of any other verifying documents
from the enrollee, the state exchange relies
on information provided by the federal
government, which are tax returns, to confirm
a persons income. They look at modified
adjusted gross income from the last available
tax year but the information isnt updated to
the present.
Because of these types of problems many
people want the state government to change
the policies involved related to Medi-Cal.
There is obviously a better way to do it than
just telling people, youve been switched to
Medi-cal, now deal with it.
Well, these are just a handful of things that
I have experienced, been involved in, and or
read about and discussed with others over
the years, knowing that this program with its
positives, has many negatives which need to
be overcome. The upkeep and maintenance

seems disproportioned in value to what

it provides to all, patients and providers
alike. Youre reading this and have probably
thought of a multiplicity of other issues I didnt
even touch on. Go ahead and say it: This
Band-Aid needs changing.

This program, while

knowing the positives,
has many negatives
which need to be



Lamon Willis CPCO, CPC-I, COC, CPC

Lamon Willis is a healthcare professional with more than 20 years of experience in hospital and physician
revenue cycle, practice management, compliance, coding, billing, and client services. He has been providing
healthcare consulting and solution services to hospitals and physician organizations throughout the country.

To learn more about Healthicity Audit Services and Solutions,

please visit or call 877.777.3001