Association for Public Policy Analysis & Management

Background: In the wake of the Affordable Care Act (ACA), states faced two key policy decisions regarding Medicaid with the potential to expand access to care for low-income and underserved populations. These decisions were, first, whether to expand eligibility criteria to include childless adults and other individuals with incomes below 138% of the Federal Poverty Level, and, second, whether to extend the ACA’s primary care “fee bump,” which raised Medicaid fees for primary care services up to 100% of Medicare fee levels during 2013-14. The latter decision, which many argued would improve access in Medicaid because many physicians did not accept Medicaid patients due to the program’s low fees, has received comparatively little attention from policy researchers. Despite the linkages between these two policies, six states (Alabama, Georgia, Maine, Mississippi, Nebraska, and South Carolina) rejected Medicaid expansion but extended the fee bump, paradoxically continuing one ACA provision at significant state expense while rejecting another ACA provision, the expansion, and its enhanced federal match.

Methods: We used an interpretive comparative case study approach to understand factors that influenced these important state policy decisions in Medicaid. We conducted semi-structured interviews with legislators, Medicaid officials, and key personnel at state provider organizations and Medicaid managed care organizations in five of the six states—as well as in three comparison states with similar demographics and political dynamics—between October 2015 and January 2016. These interviews focused on relevant economic, political and procedural factors while also gathering key details concerning states’ established processes for updating Medicaid fee schedules. Additionally, we examined statistical correlations between select characteristics of states—including rates of provider participation in Medicaid, Federal Medical Assistance Percentages, and party control of state legislatures and governorships—and their decisions to extend the fee bump and expand Medicaid eligibility.

Findings: We found that fee bump extension proposals were more successful in states where they were dissociated from major national policy debates surrounding the ACA, actionable with the input of relatively few stakeholder entities, and well-aligned with pre-existing policymaking structures and decision trends. Furthermore, in most cases, states were more likely to extend the fee bump where the direct financial costs of doing so were lower. Conversely, in non-expansion states fee bump extensions were more common where historical fees were lower (thereby raising such proposals’ costs)—some policymakers may have considered extending the fee bump as a way to appease providers disappointed at the failure of legislative efforts to expand Medicaid.

Implications: In a persistently contentious political environment, our findings about how health policy advocates advanced their agendas in the course of ACA implementation generalize to current health policy debates. Moreover, Republican proposals to cap or reduce federal funding for Medicaid, if enacted, would likely both give states greater flexibility in how they could structure and administer their Medicaid programs and also intensify states’ incentives to contain program costs. In this context, states’ established decision-making processes for updating Medicaid fee schedules, which we elucidate in this study, may shape the future of the Medicaid program.