If you’re a physician living in a state like California that opted to participate in Medicaid expansion under Obamacare, be prepared for massive cuts in reimbursement or massive tax hikes. Or for both.
Another report on the looming impact of the fattening of Medicaid rolls reveals more of what others previously reported: Lured by the incentives of 100% federal funding for the newly eligible enrollees, many states liberalized the requirements for Medicaid coverage. Originally intended as a safe harbor for the poor and disabled, Medicaid expansion brought able-bodied, single adults earning more than the pre-expansion income cutoff into the program.
Supposedly free money lured politicians into the trap like free samples lure entire families into Costco on a Saturday.
But just as free samples aren’t really free (they come with guilt and thus trigger social responsibility, the so-called “reciprocity effect,” causing shoppers to make “impulse” purchase of little puff pastries and anti-oxidant sports drinks made with giga-syllabic ingredients), “free” Medicaid money from the Feds (actually money from taxpayers across the nation, not just the expansion states) comes with some very sticky strings:
(1) Those newly eligible acted like ants at a picnic, cashing in on the new “free” (for them, in the short run, at least) Medicaid coverage. In fact, the number of new enrollees mushroomed bigger than the mushroom clouds of Kim Jong Un’s dreams: California projected 910,000 new enrollees and got, as of last May’s count, 3.84 million! Just an error of 322%!! New York guessed (oops, projected) low by 276%!! And, Illinois missed by only 90%!!
(2) The “free” money lasts only for a few years – the Feds transfer 5% of the burden back to the states next year and then 10% by 2020.
(3) And, when the “free” runs out, the taxpayers of states like California, New York and Illinois will be stuck with the bill for, well, probably forever.
I’m not trying to get political on you here. What I’m trying to show you is that the states that took the bait will have only 3 options to get themselves out of the mess:
(i) They can cut back reimbursement.
(ii) They can increase taxes.
(iii) They can do both.
I don’t believe that they have a fourth choice, paring back the eligibility requirements for their Medicaid programs, because it would be politically untenable for their “leaders” who have run on the welfare state ticket.
Unfortunately, the impact goes beyond their choice (which will be option #3) straight to your practice should you be so lucky as to be located in one of the many states that underestimated the negative financial impact of their opt-in. For example:
(a) Lowered reimbursement will adversely impact those medical groups serving a high Medicaid population.
(b) The unknown actual amount of looming reimbursement cuts will create doubt in forecasting revenue in physician-hospital contracting. For example, it will become very difficult to forecast necessary stipend support under multi-year exclusive contracts (e.g., exclusive anesthesia contracts or exclusive radiology contracts). Medical groups must retain the right to renegotiate stipend support or terminate the agreement on very short notice in the event of a financial disaster resulting from plunging reimbursement.
(c) Groups with significant Medicaid populations will need to closely examine their physician compensation plans to make them flex with reimbursement or, even better, collections. Being wed to pay someone $X per unit on a production basis will become hell if reimbursement slips to $X-Y.
Oh, one more thing. You can expect your taxes to go up, too, because even though your income will go down, you’re “rich” and will be required to pay your “fair share.”
