Ever had an employer promise you a raise and not deliver? Sure, occasionally the payroll department delays getting the money in your paycheck, but generally speaking, you expect your employer to follow-through. Will this be the case with the mandatory bump-up in Medicaid payment rates to Medicare-equivalent levels for primary care services? Wonk-warning ahead – this discussion gets thickly into the weeds of Medicaid policy. (For a basic primer on the proposed rule that will increase primary care reimbursement in Medicaid, enacted as part of the Affordable Care Act, check out my earlier blog.)

Although the federal government is picking up 100 percent of the tab for the increase, the law establishes a point in time – July 1, 2009 – as a base for the increased federal reimbursement. In other words, states that have decreased primary care service rates since July 1, 2009, will need to restore payment rates for affected primary care physicians, subspecialists and practitioners. Given continuing fiscal challenges, we may well expect those states to be less than enthusiastic about implementing this critical increase intended to help assure adequate access to essential primary care services in Medicaid.

So who are those states? Well that’s not so easy to determine. According the most recent annual Kaiser 50-State Medicaid Budget Survey, 11 states decreased payments to primary care physicians in 2011 and nine (9) did so in 2012. The survey doesn’t list the states, but it does give some examples. However, because the survey did not collect these data in 2009, the simple fact that states decreased rates in the most recent two years doesn’t tell us if those rates are below those in place on July 1, 2009. Regardless of whether states will need to restore cuts, the law requires all states to reimburse primary care services at levels equivalent to Medicare in calendar years 2013 and 2014.

So what are states required to do and what will the federal government do to make sure primary care physicians receive this much-needed boost, particularly given that some states may be reluctant to follow through?

States must file a Medicaid State Plan Amendment (SPA).

First, states must file a SPA to reflect the increase in applicable fee schedule payments in 2013 and 2014 unless, for each of the billing codes eligible for payment, the State currently reimburses higher than the respective Medicare rates in those years. Under existing Medicaid regulations which address federal authority to enforce state compliance (42 CFR 430.35), CMS has the authority to fully or partially withhold Medicaid payments to a state that has not met a state plan requirement or if, in practice, it is out of compliance with a federal requirement.

States must develop a methodology for increasing managed care rates and submit it for approval to CMS prior to 2013.

While it is relatively straightforward to implement the increased rates in a fee-for-service environment, it gets more complicated when states pay managed care entities on a full or partially capitated basis. In order to receive the enhanced federal matching rate, states must obtain information from managed care entities to make a reasonable estimate of the increased amounts to be paid for each of the specified services to eligible physicians. The state then must develop a methodology for calculating the differential to be paid to the managed care entity. This methodology must be submitted by the state to CMS for approval before January 2013.

States must amend their managed care contracts to ensure that primary care physicians benefit directly from the rate increase.

In amending these contracts, states also must require managed care entities to provide sufficient evidence, as determined by the state, that they have met the increased payment requirement. CMS plans to conduct a state-by-state review of managed care contracts to further assure compliance with federal regulations.

Primary care physicians and practitioners provide essential preventive and routine care services that keep kids and families healthy and save health care expenses down the road. We commend CMS for proposing a process to assure providers get the increased reimbursement rates they are entitled to by law. The proposed rule, which was published in the federal register on May 11, 2012, can be found here. The deadline for comments is June 11, 2012. As always with proposed regulations, it’s just as important to let CMS know what you like as it is to suggest areas that can be improved. We’ll be drafting comments on the proposed rule and will be happy to share with partners soon.