Association for Public Policy Analysis & Management

Medicaid beneficiaries often have a more difficult time finding available health care providers who accept their insurance than patients with private coverage. This lack of access has been attributed to low reimbursement rates relative to other payers. For example, in 2012, the state-level ratio of Medicaid-to-Medicare physician fees was 0.59 for primary care providers. Limited access to primary care services and less use of preventive care adversely affect Medicaid participants’ health and results in higher rates of emergency department and hospital use, increasing Medicaid costs.

We use data from the Medical Expenditure Panel Survey (MEPS) to investigate the impact of changes in Medicaid payments to primary care physicians on the use of medical services. The variation in Medicaid physician payments comes from the Medicaid fee bump, a provision of the Affordable Care Act mandating that states raise Medicaid payments to match Medicare payment rates for primary care visits in 2013 and 2014. Because Medicaid payment generosity varied considerably across states before the mandated fee increase, the policy had a heterogeneous impact across states. We merge state-level Medicaid fee schedules for primary care services to the MEPS in order to calculate the magnitude of the fee change across states and time. We then regress different measures of healthcare utilization on state-level fees, while using two different strategies to account for state policy endogeneity. First, we include state and time fixed effects in our models, so identification comes from changes in fee schedules within states over time. Second, we exploit exogenous variation in the generosity of Medicaid reimbursement rates driven by Medicaid fee bump using a regression discontinuity design.

Preliminary results indicate that increasing Medicaid payments to primary care providers are associated with significant improvements in access to care, and increases in office-based primary care visits. These improvements are larger in counties that are underserved for primary care services. Increases in fees in counties that are underserved by primary care physicians also lead to a statistically significant shift from ED and outpatient departments toward physician offices. In addition, improvements in healthcare access resulting from higher Medicaid payments are larger and more precisely estimated among those with only Medicaid coverage. Finally, we find that higher payments to primary care physicians improve the quality of care from the consumer’s perspective.