According to a July 2021 study published by the University of Chicago’s Becker Friedman Institute for Economics, “A Denial a Day Keeps the Doctor Away,” both the costs for collecting claims and the rates of claim denial are higher for Medicaid than they are with either Medicare or commercial insurance. In states where this results in fewer Medicaid reimbursements, doctors are not as willing to accept Medicaid patients.

Using data for approximately 90 million patients visits from 2013-2015, researchers analyzed claims denials and computed billing costs for a range of insurance options. Their research revealed that following the initial claims submission, 25% of Medicaid claims resulted in denied payments for a minimum of one service. By comparison, claims denials for Medicare and commercial insurance were 7.3% and 4.8%, respectively.

Practices that don’t dispute claims denials lose revenue, while those that appeal claims denials and receive payment afterward face additional billing costs. The researchers referred to this combination of decreased revenue and additional billing costs as the cost of incomplete payment (CIP). CIP averages were significantly higher for the contracted fee of a typical visit with Medicaid (17.4%) versus Medicare (5.0%) and commercial insurance (2.8%).

The study investigators estimated that a CIP increase of 10 percentage points lowers the chances that physicians accept Medicaid patients by 1 percentage point, if they move from one state to another. This reduces the chances that physicians in states with a higher CIP will accept Medicaid patients by 2 percentage points.

The researchers also showed that Medicaid yielded significantly lower revenue levels for physicians, when compared with revenue yields from other insurance types. Whereas claim amounts universally averaged $154, Medicaid averaged a mere $98. Furthermore, while each Medicaid claim yielded a total revenue of $84, Medicare and commercial insurance yields were significantly higher, at $131 and $175, respectively. As such, physicians are accepting fewer Medicaid patients than Medicare patients, with data from 2009-2015 showing a 72% rate of acceptance for Medicaid patients versus an 84% acceptance rate for Medicare patients.

Combined with Medicaid’s high CIP, lower reimbursement rates lead to profound physician losses. the study team likened this outcome to a tax on physician revenues. Improving Medicaid claims administration could be a key feature in not only lowering Medicaid’s CIP, but also in aiding the mending of healthcare inequities for low-income Americans.