Medicaid Financing and Reimbursement

The U.S. spends about 10% of its budget on Medicaid and those expenses vary a bit by state. States like California with a very large Medicaid program spend upwards of $81 billion per year whereas Wyoming averages closer to half a million.

In almost every state, Medicaid is often the biggest program in state budgets after education. The cost of program is shared by the state and the feds using something called the Federal Medical Assistance Percentage (FMAP) to calculate the federal government’s contribution. Currently, Mississippi has the highest FMAP with the feds contributing nearly 76% of total Medicaid costs.

Fee for service (FFS) provider reimbursement rates vary by state, but are typically only around 60% of the reimbursement rates provided by private health insurance plans. Because of the low rates, doctors often find themselves limited in the number of Medicaid patients they can take on and sadly, many avoid seeing Medicaid patients all together. The number of physicians accepting Medicaid is increasing, particularly among younger physicians and physicians of color.

As a way to encourage more primary care providers to accept new Medicaid patients, the federal government provided a Medicaid “fee bump” for primary care services up to 100% of Medicare rates. The bump only lasted between 2013-2014 with a total of $8.3 billion in enhanced provider payments.

Image from Kaiser Family Foundation.



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