A recent study published by Health Affairs has proven what we all know to be true: Fee-for-service Medicaid is the most difficult insurer to bill. The study, conducted by economists, revealed a claim denial rate 17.8% higher than other insurers. The result is an increase in administrative and labor costs, but also a situation that creates problems for providers. Medicaid has long been plagued by billing problems, and there doesn’t seem to be an end in sight.

Number Crunching

Fee-for- service Medicaid claims are denied at a rate of 18%, 10.7% higher than Medicare denials. For private insurers, Medicaid claim denials come at an average of 12% higher. Some of these claims are legitimate denials, as in the case of fraudulence or uncovered access. Yet, the rates are significantly higher for Medicaid denials, revealing there are more factors at play. The Health Affairs study estimates the health care sector encounters anywhere from $43 to $54 billion annually in challenged revenue from all insurance denials.

The Complexity of Fee-for- Service Medicaid

Physicians are often hesitant to take on Medicaid patients, simply due to the complex nature of the billing process. Lost revenue, increased billing costs, and extra manhours have turned many
clinicians away from the payer. Yet, a growing population utilizing Medicare is causing some resistant physicians to rethink their denial of Medicare patients. Economically speaking, accepting Medicare provides a better revenue for clinics than self-paying patients, even with the low reimbursement rates. Many states have taken an active role in increasing reimbursement rates, but the incentive typically doesn’t entice physicians enough to take on the patients.

Claim payments for Fee-for- Service Medicaid are the longest of any US insurer. Wait times for payments or denials can vary from 36. to 114.6 days. Other insurers have much quicker turn around times, making them more appealing for physicians. Studies have shown states with faster Medicaid turnaround times also have higher percentages of physicians accepting the insurance.

Other issues cited by physicians for denying Medicaid patients include the lack of child care many families face. Medicaid families are more likely to visit a doctor as a group, causing cramped conditions. Some physicians see this as a detriment to their customer service process. Medicaid patients also have a high rate of missed appointments, and are less apt to comply with treatment provided. All factors combined, Medicaid patients are more likely than others to negatively affect a physician’s revenue.

Costs of Medicaid Inefficiencies

The biggest factor in Medicaid inefficiencies is the billing process. Providers are required to obtain more information and pre-authorizations for Medicaid patients, which drives up labor costs. On the back side, claim denials and readjustments also cause additional man hours and labor costs. The medical claims processing becomes increasingly more difficult and drives physician costs skyward.

The US spends more money on healthcare than any other high-income nation. Recent reports reveal the cost differential is directly related to labor and administrative costs. Other countries’ processes are simpler and more streamlined compared with the US. A Health Affairs report found administrative costs to account for a whopping 30% of all US healthcare costs. These costs are coming directly from inefficiencies in insurance and payer companies, not to be blamed on medical billers, or medical billing software.

Costs associated with Medicaid services also include fraud, waste, and abuse. The federal government is responsible for funding the insurance, but leaves it up to the states to implement. The result is a federal pot of money being managed 50 different ways. State systems often have weaknesses, leading to underpayment, overpayment, or payment to the wrong providers. Many states have not developed strong program oversight to prevent and remedy the errors. Audits do occur, but are not always effective.

Fixing Medicaid for Everyone

Patients, medical billers, and physicians would all benefit from improvements to the Medicaid system. Medical claims processing should be the first order of business for a Medicaid overhaul, to refine the system for every stakeholder.

Improved Reimbursement Rates

Medicaid only pays 66% of what Medicare reimburses. Private insurance companies reimburse at even higher rates. To create an insurance plan more appealing to providers, a simple boost in reimbursement rates would go far. Of course, Medicare funding is based on politics and can fluctuate at any time. Washington needs to realize physicians are ultimately fighting a losing battle by accepting Medicaid.

Faster Turnaround Time

Another aspect of Medicaid improvement is in payment and denial processing. States with long turnaround times would be better served to model plans after those states with the shortest wait times. Refining the processes to reduce wait times would incentivize physicians toward the plan. Physicians are often left to foot Medicaid bills as he or she waits for reimbursements.

Overall Program Expansion

The Medicaid program requires an overall expansion to meet the growing needs of the population. The number of families choosing Medicaid increases each year, requiring the payer to grow at a duplicate rate. Increasing funds for Medicare administrative costs can alleviate the pain felt on the physician’s side. Growing the administrative side of Medicare can work to create faster turnaround times, more accurate claims, and handle the required workload efficiently.

Medicaid in the Future

The problems with billing Medicaid patients have been known to medical billers and physicians for many years. The complexity of the billing process and lag in reimbursement times are frustrating for many providers and billers. Many providers simply don’t see Medicaid as a fair trade off for the services provided. The difficulty is growing as many patients are unable to find Medicaid providers. As the population grows and more physicians are hesitant to provide the services, the federal government needs to take a long, hard look at the program. The US healthcare systems is struggling in all facets, but federally funded programs should not be one of them.

Sources:
www.healthaffairs.org/doi/10.1377/hlthaff.2017.1325
www.healthaffairs.org/doi/abs/10.1377/hlthaff.2012.1010
www.healthcaredive.com/news/labor-administrative- costs-drive- us-healthcare- spending-far-beyond- other-n/518994/