Has Leisure Time Become Medicaid's New Competitor?

Dozens of state Medicaid programs pay pediatricians poorly.1 There have been some successful court challenges to paltry reimbursement rates for pediatric care2; nonetheless, many Medicaid programs manage to get away with extremely low reimbursement levels. These states' unspoken strategy is to rely on subsidized safety-net providers (such as federally qualified health centers and hospital emergency and outpatient departments) and private practitioners who are willing to accept below-market reimbursement rates for appointments not taken by better-paying, privately insured patients. However, recent trends have indicated that the days of Medicaid on the cheap may be waning. Safety-net providers are stretched to capacity,3,4 and an increasing number of young pediatricians value leisure time more than Medicaid's reimbursements. Fortunately for low-income children, pediatricians are greater participants in Medicaid than any other specialty despite its uncompetitive fees. Medicaid accounts for an average of 34% of pediatricians' revenues, more than twice the average for all US physicians,5 and many pediatricians will treat all children regardless of reimbursement level.6 However, when Medicaid rates are too low, strong economic incentives push doctors toward maximizing the number of privately-insured patients in their practice and minimizing the number of Medicaid-insured children that they treat. Historically, state Medicaid programs have counted on the immutable economics of private practice. The vast majority of practice overhead costs are fixed (eg, nonphysician personnel, rent, malpractice insurance premiums), but the marginal cost to treat each … Address correspondence to Samuel S. Flint, PhD, Indiana University Northwest, School of Public and Environmental Affairs, 3400 Broadway, Gary, IN 46408-1197. E-mail: sflint{at}iun.edu