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Report: CT Medicaid underpays many health care providers

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Report: CT Medicaid underpays many health care providers

Feb 19, 2024 | 1:00 pm ET
By Katy Golvala
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Marisol Galarza, a pediatric care coordinator at Fair Haven Community Health Care, helps a patient with her renewal application. Galarza has helped at least 67 people with their applications so far. SHAHRZAD RASEKH / CT MIRROR
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Marisol Galarza, a pediatric care coordinator at Fair Haven Community Health Care, helps a patient with her renewal application. Galarza has helped at least 67 people with their applications so far. SHAHRZAD RASEKH / CT MIRROR

Connecticut’s Medicaid program pays providers less for specialist physician and behavioral health services compared to peer states, a report released by the Department of Social Services found. 

The study analyzed Medicaid reimbursement rates for more than 11,000 physician specialist, dental and behavioral health services. The findings reveal that Connecticut paid less than a peer state benchmark for 85% of services analyzed and less than a Medicare-based benchmark for 94% of services analyzed. 

“We knew that Connecticut’s rates were low. I don’t think I realized just how low they were,” said Sen. Matt Lesser, D-Middletown, co-chair of the Human Services Committee. “It’s a miracle that we’ve been able to run a functioning Medicaid program when we’re so out of whack with peer states.”

The peer state analysis compared Connecticut’s Medicaid reimbursement rate to an average of rates for five states: Maine, Massachusetts, New Jersey, New York and Oregon. These states were selected for the benchmark either because of geographic or economic similarities to Connecticut or because they had conducted their own rate study.

The Medicare analysis compared the state’s Medicaid rates to 80% of the rates paid by Medicare, the federal program that covers people 65 and older. Some rates included in the peer state analysis were not included in the Medicare analysis because the services don’t have a Medicare equivalent.

This is the first in a two-phase study on Medicaid reimbursement rates, with findings from the second phase due early next year. 

Medicaid reimbursement rates establish how much the state pays providers to treat low-income patients. In 2007, Connecticut set the Medicaid reimbursement rates for most physician services at 57.5% of the Medicare rate at the time. The rates have not been broadly adjusted since, though certain providers, including primary care physicians and OBGYNs, have received rate increases.

[Boost to CT Medicaid rates could mean more access for patients]

“The first biggest problem was that the specialist physician rates were set at 57.5% of Medicare. That’s really low,” said Mark Shaefer, vice president at the Connecticut Hospital Association. The second issue, Shaefer said, is that most of those rates haven’t been adjusted in over 15 years.

As a result of the low rates, many physicians in private practice find that they aren’t able to afford to treat as many patients with Medicaid as they would like, which restricts their access to care, explained Mariam Hakim-Zargar, a Torrington-based orthopedic surgeon.

“No person should be treated as a second-class citizen because of the type of their insurance, and that’s unfortunately what happens with someone who has Medicaid,” she said.

The rates paid to Connecticut’s specialists, like cardiologists and dermatologists, rank among the lowest in the nation, meaning that doctors and other care providers here receive less than most of their peers in other states to treat patients with Medicaid. 

According to the study, behavioral health, surgical and anesthesia providers are among those most underpaid by the state, with over 90% of their services falling below benchmark rates. The majority of dental and primary care provider rates came in above the established benchmarks.

The report recommended increasing rates for behavioral health specialists and direct treatment autism spectrum disorder services to bring them in line with the peer state benchmark. It also recommended basing rates for physician specialists to a percentage of Medicare. The report also recommended setting timelines for rate adjustments and conducting rate reviews at least every five years for most services.

“If we’re looking for the most acute pain points that affect access to essential services, I think physician services and behavioral health are exactly the place to focus,” said Schaefer.

Patient access and financial strain

Physicians say the low reimbursement rates create barriers to patient access.

In many cases, Hakim-Zargar explained, Medicaid payments don’t even cover her cost of providing care, making it financially straining to treat low-income residents. 

“No business would operate that way. I don’t know of any contractor who’s willing to build a road for half of what it’s going to cost them to build the road. But for some reason, doctors are expected to do this,” she said.

Hakim-Zargar said many physicians today graduate with mountains of student debt, which makes it difficult for them to afford the cost of the low reimbursement rates. She can afford to accept the vast majority of Medicaid patients because she graduated with very little debt, she explained, but she knows many physicians who aren’t in the same position.

“Thirty, 40, 50 years ago, there was very little debt. Doctors came out, they had good income, and they could afford to absorb the cost of taking care of Medicaid patients,” she explained. “Nowadays, it’s nearly impossible because nobody has that kind of financial leeway anymore.”

Hospitals and community health centers, which must accept patients regardless of ability to pay, say they’re losing money.

Hospitals were paid 62 cents on the dollar for treating Medicaid patients in the 2022 fiscal year, according to a report published by the Office of Health Strategy. Community health centers across the state were underpaid by $65 million for medical services provided to patients with Medicaid coverage, said Jennifer Granger, president and CEO of United Community and Family Services in Norwich. 

“When the state agrees to participate in the Medicaid program, it’s responsible for the Medicaid members that are enrolled and to provide them with the highest quality care possible and appropriate access to services,” said Granger. “By not paying the network of providers adequately, they’re shifting the cost to nonprofit community health centers to bear the burden, and it’s not sustainable. We cannot continue to function in this environment.”

A legislative push

Legislators plan to push for increases to the Medicaid rates, despite Gov. Ned Lamont’s reluctance to commit additional funds to the issue in his proposed budget.

Last year, a bill failed to pass that would have raised Medicaid rates to 100% of Medicare by June 2028. Instead, the budget authorized $3 million in American Rescue Plan Act funds for the two-part study. It also provided $7 million to increase the Medicaid rates paid to specialist physicians and $5 million to increase the rates paid to ambulance providers.

At the time, the Lamont administration said that it planned to tackle the issue more intentionally the following year. 

“We’re well aware that the rates need to be updated, and we have a plan to do that next year,” said Office of Policy and Management Secretary Jeffrey Beckham last June, explaining that the state was looking to the funded study to provide direction on how to make those increases.

But the governor’s proposed budget, released last week, maintained the $7 million he and lawmakers agreed upon last year to bolster rates for physician specialists, dentists and behavioral health providers. It also recommended suspending the rate hikes already approved for ambulance and methadone maintenance providers. 

Beckham said that officials were, once again, waiting to see the results of the rate reimbursement study before deciding where to prioritize the rate increases. Spokesperson Giovanni Pinto said the administration isn’t planning to update its budget proposal based on the findings of the study.

“This was only the first part of a two-part study, with the next report due in early 2025. At this time there are no anticipated amendments based on the study as the Department of Social Services will need to work with their legislative counterparts to process this initial report,” said Pinto in an emailed statement.

Rep. Jillian Gilchrest, D-West Hartford, co-chair of the Human Services Committee, had hoped to see Lamont propose a greater health care investment.

“I’m disappointed,” she said. “At this point, the rates are so low that providers cannot offer health care to Medicaid recipients.”

Gilchrest said she still believes the legislature will make gains on the rates, even though the governor’s proposal does not include an increase.

“Now it’s our turn,” she said. “I think there is a high likelihood for increased investment in Medicaid rates because I hear about it a lot from my colleagues. It truly impacts providers across the state.”