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How Medicaid Reimbursement Works

Unlike Medicare, which has standardized national payment rates, Medicaid reimbursement rates are set by individual states. These rates are based on one of three methods:

1. A percentage of Medicare’s reimbursement rate
2. A market-based assessment
3. A state-determined fee scale

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.

For example:

• A primary care visit reimbursed at $100 by Medicare may only be reimbursed at $78 by Medicaid.
• In some states, Medicaid pays less than half of what private insurance pays for the same procedures​.

This underpayment discourages providers from accepting Medicaid patients, contributing to physician shortages in low-income and underserved communities.

Why Doctors Are Dropping Medicaid Patients

There are several reasons why physicians are increasingly opting out of Medicaid:

Financial Struggles for Independent Clinics

Private practices and independent clinics operate on tight budgets. Since Medicaid reimburses at lower rates, some clinics lose money when they accept too many Medicaid patients​. This forces many providers to limit the number of Medicaid patients they see or drop the program entirely.

Administrative Burdens

Doctors report that Medicaid paperwork and billing requirements are more complex and time-consuming than private insurance​. Many offices lack the staff and resources to handle the extra administrative work, leading them to prioritize privately insured patients instead.

Payment Delays

Unlike private insurers, Medicaid reimbursement often takes longer to process, leaving clinics waiting weeks or months to receive payment​. These delays can create financial instability for providers.

Provider Burnout

With Medicaid patients making up a large portion of the uninsured and underinsured population, doctors seeing Medicaid patients often treat patients with more complex health conditions. Combined with lower pay and administrative stress, this contributes to higher burnout rates among providers​.

Who Is Affected by This Crisis?

The Medicaid payment crisis disproportionately impacts:

Low-Income Families

Medicaid covers one in five Americans, but patients often struggle to find a doctor who will accept their insurance. This results in longer wait times or patients going without care altogether.

Rural Communities

Rural areas already suffer from severe doctor shortages, and with fewer providers accepting Medicaid, rural patients are left with almost no options​.

People with Disabilities

Many individuals with disabilities rely on Medicaid for essential medical services. When doctors stop accepting Medicaid, patients may need to travel long distances to find care.

Children on Medicaid

Over 35 million children are enrolled in Medicaid or CHIP, yet declining provider participation makes it harder for them to access pediatricians and specialists​.

What Can Be Done to Fix the Crisis?

Several policy changes could help increase doctor participation in Medicaid and improve healthcare access:

Increase Medicaid Reimbursement Rates

Raising reimbursement rates to match or come closer to Medicare levels would make Medicaid more financially viable for doctors​.

Reduce Administrative Burdens

Simplifying the Medicaid billing process and streamlining paperwork would make it easier for doctors to accept Medicaid patients​.

Offer Incentives for Providers

Loan forgiveness, tax incentives, or higher Medicaid payments in underserved areas could encourage more doctors to stay in the program​.

Expand Telehealth Services

Increasing Medicaid coverage for telehealth visits could improve access to care, especially for rural patients who have fewer provider options​.

Improve Funding for Rural and Safety-Net Clinics

Investing in community health centers, rural clinics, and safety-net hospitals would help ensure Medicaid patients have places to go for care, even when private providers drop out​.

Why Action Is Needed Now

Medicaid provides lifesaving healthcare coverage to millions of Americans. But if more doctors stop accepting Medicaid, low-income and vulnerable populations will be left without adequate medical care.

To prevent a healthcare access crisis, policymakers must act now to increase reimbursement rates, reduce administrative burdens, and provide incentives for doctors to keep seeing Medicaid patients.

The future of America’s most vulnerable patients depends on it.

Determinants of Health: Access to Healthcare, Socioeconomics, Insurance, Medical Providers, Public Services, Hospitals