The Medicaid primary care rate increase, a federal policy that requires Medicaid programs to reimburse qualified primary care services at Medicare levels, is nearing the end of its two-year lifespan.  Enacted under the Affordable Care Act (ACA), this policy—funded 100 percent by the federal government—aimed to increase access to Medicaid primary care services, both before and during the ACA’s Medicaid expansion, by enticing more primary care providers (PCPs) to join or remain in the program.

At the current time, the federal government has not taken steps to extend the rate increase past 2014. While Congress remains in session, it is unlikely to take up this issue. However, a small handful of states — Alabama, Colorado, Iowa, Maryland, Mississippi, and New Mexico as well as the District of Columbia —  have taken it upon themselves to extend the policy at the state-level. These states will have to pay a portion of the difference between their current Medicaid rates and Medicare’s higher rates, whereas the federal government previously paid the entire difference in 2013-2014.

A recent Center for Health Care Strategies (CHCS) issue brief, Medicaid Primary Care Rate Increase: Considerations Beyond 2014, lays out recommendations for improving the policy if or when it is extended, whether at the state or federal level.

Background on the Primary Care Rate Increase

Provider participation in Medicaid has historically lagged behind participation in Medicare and commercial insurance, at least in part because of lower payment rates. The drafters of the ACA foresaw a coming storm: millions of people would sign up for Medicaid starting in 2014, but would then be unable to find a PCP, or would be forced to wait months for a visit.  Early in the deliberations to shape the rate increase, considerable discussions occurred around making the policy permanent, but budget concerns took precedence.

As a compromise, the ACA put forth a temporary measure, requiring states to boost Medicaid rates to Medicare levels for calendar years 2013 and 2014. While the rate increase was written and enacted with the best of intentions, it was fraught with challenges from the outset, due in large part to complications implementing it in Medicaid managed care (the policy was written from a fee-for-service (FFS) perspective).  States also faced difficulties related to: verifying which providers qualified for the increase; reconciling the FFS-oriented rate increase with value-based payment initiatives; defining the term “primary care provider;” and identifying the primary care services covered.

Recommendations for Improving the Policy

Drawing from interviews with policy experts and staff from state Medicaid programs, health plans, and provider organizations, CHCS identified a handful of key recommendations for improving the Medicaid rate increase, if extended into the future.

• Implementing the Rate Increase in Managed Care: Provide states the flexibility to incorporate the enhanced funding into existing managed care capitation payments—or establish new, simplified payment methodologies—to better align with state goals and minimize administrative burdens.

• Identifying Eligible Providers: Provide states the option to assume control of the provider verification process by using existing data sources (e.g., board certification records, claims data, and/or health plan physician enrollment data) to confirm providers’ primary care credentials.

• Promoting Value-Based Payments: Enable states to use value-based payment models to implement the rate increase.

• Defining Primary Care Providers: Grant states greater flexibility in determining which specialties qualify for the rate increase.

• Identifying the Primary Care Services Covered: Provide states more flexibility in determining which codes can qualify for the increase.

While states and providers encountered a number of hurdles during the policy’s roll-out, many believe establishing parity between Medicaid and Medicare primary care rates remains an important objective that should not be abandoned after two years. If the rate increase is continued, policymakers should consider making a number of key changes that will help the policy better achieve its goals of improving Medicaid beneficiaries’ access to primary care.