Medicaid Procedure Fees in New Hampshire

Full Report (PDF)

Executive Summary

The Medicaid program in New Hampshire provides services to a variety of different resident populations – including lower income children and pregnant women, the elderly, and the physically and mentally disabled.   Many different providers serve these Medicaid enrolled individuals, including hospitals, home health care organizations, nursing homes and physicians, among others. And these providers supply a wide array of services. In this analysis, we assess how Medicaid pays for medical, surgical, and diagnostic services by all different types of providers excluding hospital inpatient, nursing home and other institutional services. In what follows we compare Medicaid service fees to two baselines: fees paid by Medicare – the primary insurer of those over 65 and the disabled – and private payers in New Hampshire – including Anthem, Cigna and Harvard Pilgrim, among other insurers doing business in New Hampshire. 

Understanding Medicaid payment levels is important for at least three reasons. First, low Medicaid fees have long been raised as a reason for poor access to services by Medicaid clients. With an increasing emphasis on the development of a medical home model of care for Medicaid recipients in New Hampshire – with a primary care doctor providing comprehensive, holistic care – understanding how the New Hampshire Medicaid program pays for assessment and preventative services is important. Second, just as with hospitals, physicians and other providers have the opportunity to cost-shift below-cost reimbursement to private premiums, making understanding the relative level of fees in the private and public sectors important. Finally, in testimony before the NH House Finance Committee in January of 2009, the Commissioner of Health and Human Services recently noted that there was little room to further lower Medicaid payment levels in the face of potential budget deficits. This analysis will serve as additional information to help assess Medicaid payment changes over the next two years.

• On average, in 2003, New Hampshire Medicaid reimbursement was slightly higher than the national average across the country. Among the four Northern New England States, only Maine’s Medicaid reimbursement rates were lower, on average, than New Hampshire’s. 
• Medicaid payments lag far behind payments in the Medicare program and in the private sector. In 2005, for a market basket of approximately 450 different services, New Hampshire Medicaid paid 65% of the Medicare payment for the same set of services. New Hampshire Medicaid paid only 48% of the equivalent set of services in the private sector. 
• Relative to the Medicare and private markets, New Hampshire Medicaid paid the most for physical therapy (88% of the private market) and psychotherapy services (85% of the private market).   Medicaid payments for primary care services were roughly 50% of the private sector payments.
• Medicaid pays very little relative to the private sector for the review and analysis of diagnostic imaging services. The ten lowest paid categories of service – when compared to the private sector payments – were all related to the review of diagnostic imaging services, such as MRIs and CT scans with Medicaid paying as little as 10% of the comparable diagnostic service in the private market. 
• To a large extent this analysis is consistent with work conducted by the Department of Health and Human Services at the request of the legislature. The Department should be commended for this analysis, which can be found on their website. 

The results of this analysis suggest that there is significant variation in Medicaid reimbursement levels relative to the benchmarks used here – Medicare and private payment. The fact that Medicaid reimbursement levels are lower than in the private sector and in Medicare on average is not surprising. The degree of variation in relative Medicaid payment rates relative to these other payers is somewhat surprising. To the extent that Medicaid fees impact provider participation in Medicaid, the existing system creates very different incentives depending on the service that is being provided.  

From this analysis it is not clear why we see these patterns of reimbursement. The relative level of reimbursement likely reflects policy decisions made long ago. Are these policy decisions still relevant?   How does this variation in payment levels impact the provision and cost of care? The point of this questioning is not to suggest that the level of payment for any given service is ‘appropriate’ or ‘inappropriate’ but rather to suggest that the policy reasoning for why these services are set the way they are is not clear. If the state is interested in developing a more transparent – and potentially more rational – framework for provider reimbursement, one option would be to more consistently implement the Medicare payment system (based on RBRVS), which was based on many national studies of the cost of doing business for physicians across the country. Even as far back as the mid 1990s, 15 Medicaid programs had adopted a Resource-Based Relative Value Scale (RBRVS) with another 11 considering adoption. 

If policy makers are concerned with the issue of cost-shifting in Medicaid with respect to inpatient providers, this analysis suggests that they should be equally concerned about the non-inpatient hospital and physician environments. Elsewhere the Center has demonstrated that a portion of private insurance premiums are driven by below cost reimbursement for Medicaid services in the inpatient market. If you assume, for the moment, that Medicare reimbursement is a proxy for cost, then there is an equally sizable private insurance premium surcharge for below cost reimbursement of Medicaid in the physician and non-inpatient market.