Vermont Doctors Say There's Another Reason To Boost Medicaid Rates

Mar 4, 2015

Lawmakers are still trying to figure out if increasing Medicaid rates will help curb the cost of private health insurance. But doctors say there’s another important reason to boost payments for providing government-funded care. They’re worried that failure to address the Medicaid issue could create a physician shortage, and put independent practices out of business.

Dr. Joe Haddock isn’t used to television cameras, or advocating for political causes. But Haddock arrived at the Cedar Creek room of the Statehouse last week ready to play a leading role in a well-attended press conference.

“Well I’m happy to be here,” Haddock said. “I’ve never done this before, so bear with me.”

At issue is the $90 million payroll tax that Gov. Peter Shumlin wants to use to boost Medicaid reimbursement rates to providers like Haddock.

Shumlin says the measure would reduce what’s known as the Medicaid cost shift, and act as a relief valve on rising private insurance premiums. But Haddock says lower insurance rates aren’t the only good reason to boost Medicaid reimbursements.

“Practices can’t continue paying only overhead, and not paying the physicians for Medicaid patients,” Haddock says. “We’re all happy to do so for an ethical reason and a moral reason, but if we can’t pay our staff, and we can’t attract new physicians, there won’t be any primary care physicians here in four or five years.”

Reimbursement rates for Medicaid on average cover only about 60 percent of the cost to provide the care. About 15 percent of the patients in Haddock’s family care practice in Williston are eligible for Medicaid.

Recent developments in the Medicaid program related to the federal Affordable Care Act have lent urgency to the issue of reimbursements. An expansion of the program, created to provide insurance for low-income people, brought about 23,000 people onto the Medicaid rolls in Vermont.

That’s put even more pressure on the state’s Medicaid budget. And the federal government at the beginning of this year rolled back temporary increases in Medicaid reimbursement rates that had been designed to accommodate the surge in enrollees.

“At our practice alone, the change in Medicaid reimbursement this year means a loss of about $125,000 to $150,000,” Haddock says.

Haddock says his practice prides itself on welcoming Medicaid patients in need of care.

“But with many of the dramatic changes in reimbursement over the last two years, I’m not sure we’ll be able to afford to do that,” he says.

Bill Young, director of the Maple Leaf Treatment Center in Underhill, says the inadequacy of Medicaid payments is only getting worse. Young’s facility provides residential substance abuse treatment.

“And gradually the gap between what it costs to provide services and what Medicaid pays for them has widened, and now each year we lose between $350,000 and $500,000 by serving Medicaid patients,” Young says.

Young says the problem is so acute that he’s begun recruiting patients with private insurance from out of state. But he says that’s not a good solution for the state of Vermont.

“If you’re successful, then you’re turning away in-state people that need our services,” Young says. “And we don’t want to do that. And then you’re creating more barriers for the local Vermonters, who are really the people we’re most interested in serving.”

Shumlin’s proposal got its highest-profile support to date last week when Vermont Businesses for Social Responsibility signed on to the plan. 

Jennifer Chiodo is a managing principal at Cx Associates in Burlington, and a member of the VBSR board of directors. Chiodo says businesses that provide quality health benefits should see their payroll tax increase returned in the form of lower insurance costs. And she says it would help even the playing field between companies that provide decent benefits and those that don’t.

“The current approach is a hidden and inequitable tax on people who pay health care premiums. So those of us who are paying premiums are already covering this cost,” Chiodo says.

Lawmakers say they want to increase Medicaid reimbursement rates. But they’ve given a cold reception to the payroll tax, and have yet to propose an alternative revenue source.