Yes, doctors and hospitals often lose money or barely break even on Medicaid patients because reimbursement rates are significantly lower than costs and private insurance rates. On average, Medicaid pays about 78% of what Medicare pays, and in some states, it is less than half of private insurance rates, often leading providers to cap the number of Medicaid patients they accept.
On average, Medicaid pays only 78% of what Medicare reimburses for the same services. For more complex procedures, the gap is even larger. This means doctors make significantly less money when treating Medicaid patients than those with Medicare or private insurance.
Medicare and Medicaid pay for physician services on a fee-for-service basis. Under fee-for-service medicine, physicians are paid either according to a fee schedule or on the basis of customary, prevailing, and reasonable charges (CPR).
For example, in New Jersey, Florida, Louisiana, and California, physicians were more than 30 percentage-points less likely to accept new patients with Medicaid coverage than those with private insurance.
About 70% of all office-based physicians accept new Medicaid patients, including two-thirds of primary care physicians and close to three-quarters (72%) of specialists. The percentage of physicians accepting new Medicaid patients varies by state, ranging from 39% in New Jersey to 97% in Nebraska (Figure 1).
Unlike Medicare, Medicaid is administered at the state level, and opt-out procedures vary widely: No Formal Opt-Out: Many states do not offer a formal opt-out process. Instead, providers simply decline to enroll as Medicaid participants.
There isn't one single "worst" state, as it depends on the metric, but Mississippi, Louisiana, Kentucky, West Virginia, Texas, and South Dakota frequently rank low for access, quality, and affordability, facing challenges like lack of providers, transportation, and lower reimbursement rates, especially in the Southeast. States with low Medicaid expansion enrollment and higher potential impacts from federal cuts, like South Dakota, Wyoming, and Utah, also appear on "worst" lists.
Unfortunately, Medicaid recipients may receive a lower quality of care, though the reasons are complicated. Ensuring quality and access remains a challenge, particularly with increasing demand and potential funding limitations.
On average, Medicaid FFS physician payment rates are two-thirds of the rates Medicare pays, although this varies greatly by state and service.
The highest-paid doctors in the U.S. are neurosurgeons, thoracic surgeons, and orthopedic surgeons. These surgical specialists earn average annual salaries between $650,000 and $760,000, making them the top earners among physicians.
Cardiac Anesthesiologist – $700K Annual Compensation.
While children and low-income adults make up the largest share of Medicaid enrollees, people eligible due to age (65+) or disability account for over half of all Medicaid spending, due to higher healthcare needs and use of costly long-term care services. Children are the biggest group by enrollment numbers, while low-income adults (especially through ACA expansion) and the elderly/disabled are key populations.
How Much Will Medicaid Pay for Nursing Home Care? While Medicaid will pay 100% of the cost of nursing home care (including room, meals, and medical supplies), a nursing home resident must contribute nearly all of their income towards these costs.
It takes some financial planning. The second downside is that it restricts you to where you can go live. If you need nursing home care, you can only go to the places that accept Medicaid as a benefit.
Summarizing, we do find corroborative evidence (admittedly based on physician self-reports) that both Medicare and Medicaid pay significantly less (e.g., 30-50 percent) than the physician's usual fee for office and inpatient visits as well as for surgical and diagnostic procedures.
Simpler Billing and More Predictable Reimbursement
One of the main reasons doctors prefer Medicare Supplement plans is streamlined billing and payment. Medicare Supplement plans work directly with Original Medicare (Parts A and B).
In many areas, finding Medicaid providers can be difficult. Medicaid's payment rates are lower than Medicare's or other insurance and may drive some providers away from treating patients with Medicaid coverage.
Eligibility rules differ between states. In states that have expanded Medicaid coverage: You can qualify based on your income alone. If your household income is below 133% of the federal poverty level (FPL), you qualify.
Loss of temporary coverage is an imminent danger to enrollees at a delicate time when their financial insecurity is heightened due to inflation. Food and energy price increases hit low-income households hardest, rendering copays and out-of-pocket requirements in some state Medicaid programs problematic.