Report: Fewer physicians are seeing Medicaid patients

Although advocates and politicians are increasing their call for improved access to medical care and medical homes for everyone, the reality is that the proportion of U.S. physicians accepting Medicaid patients has fallen slightly over the past decade, according to a national study by the Center for Studying Health System Change (HSC).

In 2004-05, the HSC report said, 14.6% of physicians reported that they received no revenue from Medicaid, an increase from 12.9% in 1996-97. There also were small increases in the percentage of physicians not accepting new Medicaid patients. The drops came despite increases in Medicaid payment rates and enrollment.

HSC senior fellow Peter Cunningham said a more striking trend is that care of Medicaid patients is becoming increasingly concentrated among a smaller proportion of physicians who tend to practice in large groups, hospitals, academic medical centers, and community health centers. Relatively low payment rates and high administrative costs are likely contributing to decreased involvement with Medicaid among physicians in solo and small group practice, he said.

But Mr. Cunningham tells State Health Watch it is unclear whether the decline in physician participation creates a problem for Medicaid participants.

"There already has been a fair amount of concentration," he says, "particularly around public hospitals and community health centers. To the extent that facilities become dependent on Medicaid revenue and there are cutbacks, it could lead to decreased access and quality of care."

HSC reports that Medicaid payment rates are considerably lower than payments from Medicare or private health insurance and historically have deterred physician participation in Medicaid. The 21% of physicians who reported accepting no new Medicaid patients in 2004-05 was a rate six times higher than for Medicare patients and five times higher than for privately insured patients, according to HSC's Community Tracking Study Physician Survey. About half of physicians reported accepting new Medicaid patients in 2004-05, compared with more than 70% for Medicare and privately insured patients.

Small part of practice

For most physicians who care for Medicaid patients, Medicaid is a relatively small part of their practice. Among all physicians who provide any care to Medicaid patients, about 60% derive less than 20% of their total practice revenue from Medicaid. But those physicians account for only about 28% of care that physicians provide to Medicaid patients in dollar terms. In contrast, HSC said, about one-fourth of physicians derive 30% or more of their practice revenue from Medicaid, but those physicians account for more than half of all physician care provided to Medicaid patients.

Mr. Cunningham said care of Medicaid patients is becoming increasingly concentrated among the minority of physicians who provide a relatively large amount of care to Medicaid patients. The proportion of all Medicaid physician revenue accounted for by physicians who derived 30% or more of their practice revenue from Medicaid increased from 43.1% in 1996-97 to 51% in 2004-05. And the proportion of Medicaid physician revenue accounted for by physicians deriving less than 20% of practice revenue from Medicaid decreased from about 38% to 28.4%.

"At least part of this shift is explained by the fact that physicians with lower levels of Medicaid participation are increasingly reluctant to take new Medicaid patients," Mr. Cunningham wrote. "For physicians with between 1% and 9% of practice revenue from Medicaid, the percentage not accepting new Medicaid patients increased from 20.7% in 1996-97 to 27.1% in 2004-05. By contrast, less than 3% of physicians who derive 30% or more of their revenue from Medicaid were not accepting new patients, and this has not changed over the past decade."

The survey found the increasing concentration of care of Medicaid patients is also characterized by a shift away from small, office-based practices toward larger group practices and institution-based practices, including hospitals, academic medical centers, and community health centers. A much higher percentage of physicians in solo or small group practices derive little or no revenue from Medicaid, compared with physicians in institutional settings and other practice types, the researchers said, while more than half of institutional providers derive 20% or more of their practice revenue from Medicaid. However, physicians in solo or small group practices still provide a substantial amount of medical care to Medicaid patients, accounting for more than 40% of all physician Medicaid revenue in 2004-05, compared to 30.5% for institutional providers.

But the trend has been for care of Medicaid patients to shift away from smaller practices over the past decade. Part of that shift reflects the fact that physicians increasingly are moving out of smaller practices and into larger groups and other practice settings. Also, physicians remaining in solo practice or smaller groups are increasingly closing their practices to new Medicaid patients.

Acceptance of new Medicaid patients varies across major physician specialty groups. General internists and family practitioners were most likely to report that their practices are closed to new Medicaid patients, according to the survey, while pediatricians and specialists are the least likely to have closed Medicaid practices.

Mr. Cunningham noted that since children are much more likely to be covered by Medicaid and SCHIP than adults, pediatricians have less ability to opt out of providing care to Medicaid enrollees. Also, many specialists have on-call responsibilities at hospital emergency departments and therefore have less ability to choose the types of patients they see in that setting.

Reasons why

Physicians in large metropolitan areas (with a population in excess of 200,000) were less likely to accept new Medicaid patients than those in smaller metropolitan areas and rural areas. The percentage of physicians in large metropolitan areas not accepting new Medicaid patients increased slightly from 21.3% in 1996-97 to 23.6% in 2004-05. Mr. Cunningham said the much greater concentration of both people and medical providers in large urban areas gives physicians in those areas greater choice about the patients they accept compared with rural physicians. Also, he said, the perceived obligation to accept Medicaid patients may be somewhat greater in rural areas since there are fewer other physicians for Medicaid enrollees to go to, particularly for specialty care.

Mr. Cunningham said the major reasons physicians give for not accepting Medicaid patients include relatively low Medicaid payment rates and high administrative burdens. Among physicians accepting no new Medicaid patients in 2004-05, 84% cited inadequate reimbursement as a moderate or very important reason for not accepting new patients. Bill requirements and paper work were cited by 70% of physicians as reasons for not accepting new patients, while about two-thirds referred to delayed reimbursement. A smaller percentage of physicians cited concerns about having a full practice or the high clinical burden of Medicaid patients.

He said such concerns also likely explain why physicians in smaller practices are increasingly closing their practices to new Medicaid patients. The administrative burden of caring for new Medicaid patients may have increased in recent years, he said, as more states require prior approval for prescription drugs and some tests and procedures. For physicians in solo and small group practices, these administrative costs may be prohibitively high on a per-patient basis given the small number of Medicaid patients they see.

Physicians in solo or small group practices are much more likely to say that billing requirements and paperwork are their reasons for not accepting new Medicaid patients than are physicians in large group practices and institutional settings, where centralized billing and economies of scale may ease the administrative burden of treating Medicaid patients.

Mr. Cunningham projects a continuing trend of increasing concentration in the future. Physicians, he said, are experiencing considerable financial pressures and declining real incomes because of stagnant payment rates from Medicaid and private payers. Those financial pressures are leading to some physicians reducing the amount of time they spend in volunteer activities and other less profitable aspects of their practice, which may include care of Medicaid patients.

Concentration also is likely to be spurred by the increase in Medicaid managed care enrollment and the formation on Medicaid-only health plans, he said. Enrollment in managed care plans increased from about 40% of Medicaid enrollees in 1996 to 60% by 2004, and is likely to continue to increase in the future.

While Medicaid managed care plans previously included a number of commercial plans that served a mix of Medicaid and privately insured individuals, most Medicaid managed care plans now serve Medicaid enrollees either primarily or exclusively. Physician networks that contract with these plans are likely to include practices that provide a disproportionate amount of care to Medicaid patients, such as clinics and hospital-based physicians, and exclude those that serve relatively few Medicaid patients (solo and small group practices).

According to Mr. Cunningham, fundamental changes to the Medicaid program could effectively reduce Medicaid physician payment rates and decrease physician participation in Medicaid even further. Thus, the Deficit Reduction Act of 2005 is expected to reduce federal Medicaid spending in part by increasing enrollee cost sharing for premiums and health services. While previous laws had limited copayments to $3 or less, the Deficit Reduction Act will allow states to charge some Medicaid enrollees coinsurance amounts up to 20% for some services. If enrollees are unable to pay, as many analysts expect given the low incomes of most Medicaid enrollees, physicians will either have to accept the reduced Medicaid payment or increase their administrative costs to collect from patients.

Since low payment and high administrative costs are already serious physician concerns, some are likely to respond to the higher enrollee cost sharing by closing their practices to Medicaid patients. Mr. Cunningham said enrollees will continue to shift toward providers who are dependent on Medicaid revenue or who are obliged by their mission to serve Medicaid patients.

Download the tracking report at E-mail Mr. Cunningham at or telephone (202) 484-5261.