Paying doctors more — now will they treat more poor Californians?
It seems like a simple solution. Raise what you pay doctors for treating low-income patients, and they’ll treat more of them. All those waits for appointments and physician shortages that have long plagued the state’s low-income health insurance program—a program that one out of every three Californians now relies on—could be remedied with a simple dose of economics.

It seems like a simple solution. Raise what you pay doctors for treating low-income patients, and they’ll treat more of them.

All those waits for appointments and physician shortages that have long plagued the state’s low-income health insurance program—a program that one out of every three Californians now relies on—could be remedied with a simple dose of economics.

But in health care, nothing is that simple.

Yes, while debate over the future of Obamacare waxes and wanes in Congress, California doctors are happily preparing for their first state pay increase in Medi-Cal in 17 years. Physicians and advocates for low-income patients pried a $325 million raise from a reluctant Gov. Jerry Brown, who was skeptical that a doctor pay increase would translate to better care.

Even so, civil rights groups and some California labor unions are suing the state to pay doctors significantly more—the latest in a long history of legal actions that blame meager Medi-Cal reimbursement rates for delays in patient care.

One way or another, California doctors are likely to get a pay raise soon. Here’s what you need to know about how physicians may respond—and how it could impact the ability of 13 million Californians to see the doctors they need, when they need them.

How tough is it for Medi-Cal patients to get the care they need?

Overall, Medi-Cal patients have a tougher time getting the care they need than similar patients in other states, where the same program goes by its federal name, Medicaid. Recipients outside California are more likely to have visited a specialist and received a flu vaccination than recipients in California.

Medi-Cal recipients also were about 5 percent more likely to report delaying care because of difficulty getting an appointment.

Users of private insurance and Medicare (the federal health program for older people) typically fare better than Medi-Cal patients. Medi-Cal enrollees were more than twice as likely as adults with employer-sponsored insurance to use the emergency room as a usual source of care—a costly problem for the state.

Access problems are most severe for certain in-demand specialties such as psychiatry, which are even harder to come by for rural patients.

California has legally binding standards for access to care, including a maximum of a 15-day wait for specialist appointments and no more than a 90-minute drive to care for rural patients.

Unfortunately, the state has trouble collecting the data it needs to see if health plans it contracts with are actually complying with those standards.

This isn’t to say Medi-Cal is in utter disarray. Nearly 80 percent of Medi-Cal enrollees say the program provides access to most of the medical care they need. Interestingly, Spanish-speaking Latinos are among the groups most likely to report a positive experience with the program.

But without better data, it’s very difficult to know who’s doing the best and worst jobs of giving patient access—and how much difference higher reimbursements really make.

So just how stingy has California been to doctors?

California ranks 48th among all states in what it pays physicians for treating Medi-Cal patients, according to a recent and widely cited Urban Institute study. For primary care physicians, California ranks next to last—only Rhode Island pays less.

Those comparative rankings, however, are less definitive than they seem. They’re based on what the state pays on the “fee-for-service” portion of Medi-Cal, which only comprises about 20 percent of the program’s patients. Like the name entails, in “fee for service” the state pays doctors directly based off the services they provide: x dollars for a physical, y dollars for an MRI.

The remaining 80 percent of patients are in Medi-Cal managed care organizations—private health networks that receive a flat rate from the state for each patient they serve. The hope is that they can tamp down costs more effectively than the state could do on its own. Those managed care plans in turn contract with doctors—and those contract terms are confidential.

“The whole contracting process creates a black box and we don’t really know what’s going on in there,” says Gerald Kominski, director of the UCLA Center for Health Policy Research.

That makes it more difficult to easily incentivize those doctors to take on more patients. In fee-for-service, you can simply raise rates or target bonuses to certain physicians. In managed care, there’s a middleman.

While we don’t know precisely what the vast majority of Medi-Cal providers are being paid, it’s safe to assume that for most doctors it’s far less than employer-sponsored private insurers or Medicare.

Medi-Cal’s reimbursement rate for primary care has been just 41 percent of Medicare’s—meaning physicians have a much greater financial incentive to take on patients from Medicare than Medi-Cal.

Paying doctors more is going to entice them to see more patients, right?

Most research suggests that yes, raising reimbursement rates is associated with better patient access. States where Medicaid and Medicare reimbursements are about equal typically see higher provider participation rates in Medicaid than California.

“It may not be a simple linear relationship, but it’s fairly linear,” says Janet Coffman, associate professor of public policy at UCSF. “But you have to be a little careful extrapolating that out, especially to managed care.”

In fact, a recent experience with the rollout of the Affordable Care Act illustrates why. Rightly anticipating a massive swelling of Medicaid rolls, the Obama administration temporarily boosted Medicaid reimbursement rates to Medicare levels in 2013 and 2014 in the hopes of attracting more physicians to participate in the program.

But research was mixed: Some studies found that appointment availability increased for new Medicaid patients in certain states, while other states reported no increase in doctors willing to take on new Medicaid patients, and no uptick in patients seeing a primary care doctor.

Advocates for higher Medicaid reimbursements blame the mixed results on the flawed rollout of the pay raise—many doctors didn’t see the money they were promised for years after the policy was announced. Physicians also knew the increased payment rates were only temporary in most states, diluting the incentive to take on more low-income patients.

That’s the same obstacle California faces in structuring its own supplemental payments to Medi-Cal providers.

Doctors consider a lot more when deciding to take on poor patients

A marginal increase in reimbursements can be easily outweighed by the administrative strain of dealing with Medi-Cal. That’s especially true for providers without a lot of back office support, who could have difficulty making sure claims are paid on time. Many physicians also fear the risk of so-called “clawbacks,” when Medi-Cal recoups reimbursements paid to providers after a policy change or legal action.

Many doctors decide it’s just not worth it.

“If you’re a physician, you have to ask yourself, what is the administrative burden on me, how hard is it going to be for me to get paid from a Medi-Cal (managed care organization) plan, how easy is it going to be to get referrals?” says UCSF’s Coffman. “These administrative things matter.”

Geography also plays a part. If you work in a predominantly low-income community, you may have little choice but to see Medi-Cal patients. If you work in a richer area, you have more discretion. Rural areas like San Joaquin County or the northernmost stretches of the state, where Medi-Cal access is harder to come by, have a difficult time attracting doctors regardless of what type of insurance their residents have.

So how is the state planning to do this?

During negotiations with legislative leaders during budget season, the Brown administration expressed doubts about how higher payment rates translated to better patient access.

“The department has always indicated that funding and rates are only one element of access, and whether this will change access is a question,” says Mari Cantwell, chief deputy director of health care programs at the California Department of Health Care Services.

The state had options for how to distribute the $325 million in extra reimbursements approved in the budget. It could have tried to funnel payments to certain geographic areas in dire need of more physicians. It could have targeted specialty fields where doctors are in high demand. Or it could have offered higher reimbursement rates for treating new Medi-Cal patients.

Instead state health officials opted for a simpler approach—raising reimbursement rates across the board an average of 60 percent for all office visits, regardless of what type of doctor the patient sees or where the doctor works.

The result: Medi-Cal reimbursements for office visits will rise to about half of what Medicare pays, maybe more. While that sounds like a big jump, we’re talking about fairly nominal amounts per office visit. The biggest reimbursement raise—for seeing a new patient with complex illnesses—is $50.

The state also raised reimbursement rates for psychiatrists, given a severe shortage of Medi-Cal providers.

Still, the California Medical Association lobbied hard for the increase. This association of doctors calls it a cautious step in the right direction.

Calling the state’s plans for paying doctors more “encouraging,” medical association spokeswoman Joanne Adams wrote in an email that her organization would be “staying engaged” because how the program was carried out would determine its results.

California designed its plan to pass muster with federal health officials, who must approve the plan and have passed recent regulations limiting how states can direct extra payments to managed care organizations. The raises for providers in managed care programs will be similarly structured to the proposals in fee-for-service.

If approved, the payments would go into effect retroactively from July of this year.

The Brown administration also reserves the right to freeze the reimbursement raises should the federal government make major cuts to Medi-Cal. While that likely won’t affect this year’s payments, the money coming to doctors in future years is less secure.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics. For more data points reporting by Matt Levin, go here