Medicaid is the largest public health insurance provider in the U.S., and thus, any updates or neglect to the program greatly impacts patients. One issue impeding access to care is Medicaid’s notably low reimbursement rates with health providers often spending more money caring for Medicaid beneficiaries than they receive in reimbursement. For example, hospitals receive approximately 88 cents for every dollar spent caring for Medicaid patients – amounting to a $24.8 billion underpayment in 2020. The differences in Medicaid payments by state create an inequitable system where state borders significantly determine health care access and coverage.

The inconsistency among rate setting and lower reimbursement when compared to Medicare or private insurance have made it harder for Medicaid patients to find coverage. On average, Medicaid fee-for-service payments are below hospitals’ costs of providing services to Medicaid enrollees and are below Medicare payment rates for comparable services. MACPAC found that in 2011, payment rates were 78% of Medicare for the 18 Medicare-severity diagnostic-related groups studied. Studies have found that physicians are less likely to accept new patients insured by Medicaid as compared to those with Medicare or private insurance. Low reimbursement rates limit access to quality care and contribute to poor health outcomes for Medicaid beneficiaries, disproportionately impacting minority communities that are more likely to have Medicaid as their insurance provider.

Because each state largely sets their Medicaid reimbursement policy independently of the others, it creates wide variation in reimbursement rates. Eight of the 10 most populous U.S. states are ranked in the bottom half of Medicaid reimbursement rates nationally – Including Texas, Florida and Ohio; many of these have high amounts of racial and ethnic diversity, with a greater number of nonwhite residents enrolled in Medicaid. In contrast, many of the states with the highest reimbursement have smaller populations and proportionally fewer minority residents. To view the full comparison of State reimbursement rates vs. population, click here.

This year, some states made improvements to their Medicaid rates for certain services. As an example, Kansas appropriated a 30% increase in Medicaid outpatient hospital rates as well as the authority to increase the hospital provider assessment as part of the directed payment program. Illinois passed a $120 million increase to physician rates, expected to raise physician rates to 70% of Medicare. Florida passed a $134.6 million increase to enhance hospital Medicaid reimbursement rates for obstetric care. While these are welcome improvements, much more remains to be done to close overall Medicaid reimbursement gaps nationally.