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  • Aleicia Zhu

Low Medicaid and Medicare Reimbursements Hinder Ability to Receive Care

A graphic of known and projected Medicare, Medicaid, and Social Security spending from 1962 to 2022 [1].

In the healthcare industry, it is well-known that the government programs Medicaid and Medicare offer lower reimbursements to physicians, hospitals, and other establishments. To clarify, Medicaid is a state-managed welfare program for low-income residents. Reimbursement is the money provided to physicians and hospitals to cover the cost of treatment. Eligibility and reimbursement vary for these programs vary, and some states have not even expanded Medicaid. For context, Medicaid was once limited to residents who were both low-income and part of a protected group (children, pregnant women, disabled people, etc;). The Affordable Care Act allowed Medicaid to be expanded to all low-income residents, but some states have rejected this expansion [2, 3]. In contrast, Medicare is a federal program available to all residents over 65, disabled, or experiencing End Stage Renal Disease. However, it is important to recognize that these programs are not entirely free. For Medicare, it must be paid through payroll taxes before the age of 65. For both Medicaid and Medicare, there are often cost-sharing measures like copays, premiums, and deductibles, though this is typically lower for Medicaid [2].

Despite these costs, these programs are still a major expense for the federal government. At a cost of $644 billion in 2019, Medicare was the second most expensive program in the federal budget [4]. According to the graph above, these costs have only increased over the years. Because of the US’s aging population, costs are projected to increase to $1.3 trillion by 2029. In general, older people will require more care and, thus, more money [5]. On top of that, Medicare reimbursements have not increased. In fact, they have decreased in real terms because of efforts to cut costs [6]. They are also low in comparison to private insurance reimbursement rates, which are over 200% higher [7]. Then, Medicaid rates are even lower at 61% of Medicare. As a whole, both Medicare and Medicaid reimburse below cost. Besides that, Medicaid patients were more likely to miss appointments and fail to adhere to medical advice. While these programs have lower administrative costs on the government side, requirements for reimbursement are onerous for providers. In effect, private insurance patients subsidize Medicare and Medicaid patients by allowing physicians to make up the difference [8].

A $10 increase in Medicaid reimbursement per visit correlated with a 0.3 percentage point increase in the probability that a Medicaid recipient reported a doctor visit in the past two weeks [9].

This low reimbursement can genuinely affect care. Before patients can even receive treatment, they may not be able to find a physician as they often have a limited roster for Medicaid/Medicare beneficiaries [8]. This overall effect could be tested in 2013, where President Obama mandated that Medicaid reimbursement be raised to Medicare reimbursement. Specifically, for every $10 increase in Medicaid reimbursement, another 0.5% of parents were more likely to report no difficulty finding a provider for their Medicaid-insured children, which is a 25 percent change relative to the mean. Similar results were reported for adults. Additionally, reduced reported school absences among primary school-aged Medicaid recipients by 14 percent. This caused a rise in health care utilization and improved health outcomes. Also, these improved results would be reversed after the 2013 mandate expired in 2015. Furthermore, many physicians were angered by this expiration because they already took on the Medicaid patients would likely feel obligated to continue care [9].

Naturally, this bodes some concerns for healthcare reform in the US. The universal healthcare debate has gone on since Theodore Roosevelt because it is a complicated issue. Some Democratic candidates in the US 2020 election had introduced plans featuring Medicare in some ways. The 2020 Democratic primary runner-up—Bernie Sanders—sponsored a ‘Medicare for All’ plan that would eliminate Medicare copays and deductibles, ban private insurance for any procedure covered by the government, cover dental and pharmacare on top of medical services, and provide free healthcare to all residents. Virtually, it is a single-payer plan that disavows the majority of private insurance. He argues that this provides the government with greater negotiating power [10]. Pete Buttigieg—Democrat rising star and 2020 presidential candidate, however, offers a ‘Medicare-for-All-Who-Want-It’ plan. Basically, it is a public option that allows people to either retain their private coverage or buy into Medicare [11]. Nevertheless, neither plan addresses an increase in Medicare payments, which reimburse at below cost and are facilitated by high usage of private insurance. Consequently, income for doctors, other healthcare staff, and hospitals would likely drop. It may increase for a minority, like Cambridge Hospital, as they mostly treat Medicaid patients that have even lower reimbursements than Medicare. Still, it likely hurts the majority of hospitals—like “Man’s Best Hospital”—the Massachusetts General Hospital, who receives an average of 175% of the Medicare rate per procedure [12].

Overall, Medicare/Medicaid reimbursement is complicated and healthcare reform is even more so. The US government needs to balance deficits, taxation, and spending all while providing sufficient services to the public. It is a difficult task in the face of increasing costs, but one that must be addressed regardless.



[1] Medicare, Medicaid, and social security spending.png - Wikimedia Commons. (2017, December 8).,_Medicaid,_and_social_security_spending.png

[2] Digital Communications Division (DCD. (2015, June 8). What is the difference between Medicare and Medicaid?

[4] Budget Basics: Medicare. (2020). Budget Basics: Medicare. Peter G. Peterson Foundation;,the%20federal%20budget%20last%20year

[5] The Facts on Medicare Spending and Financing. (2019, August 20). Kaiser Family Foundation.

[6] Coffron, M. R. (2019, September). Medicare physician payment on the decline: It’s not your imagination. The Bulletin of the American College of Surgeons.

[7] How Much More Than Medicare Do Private Insurers Pay? A Review of the Literature. (2020, April 15). Kaiser Family Foundation.

[8] Physicians May Need More Than Higher Reimbursements To Expand Medicaid Participation: Findings From Washington State. (2017). Health Affairs.

[9] ‌Increased Medicaid Reimbursement Rates Expand Access to Care. (2019). NBER.

[10] Medicare for All. (2020). Bernie Sanders Official Website.

[11] “Just The Right Policy”: Pete Buttigieg On His “Medicare For All Who Want It” Plan. (2019, November 8). NPR.

[12] Bebinger, M. (2020, February 25). How 2020 Democrats’ Health Care Plans Would Rock Hospital Budgets In Mass. | CommonHealth.; NPR.

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