June 19, 2023

There are a number of public payers that have a material impact on all anesthesia practices for two reasons. First, the rates for Medicare, Medicaid, Champus, Tricare and workers compensation are set by government agencies and are non-negotiable. In addition, the rates that have been set for federal and state insurance programs are significantly discounted as compared to the average commercial payment rate in every part of the country. Because of this reality, we often track what we refer to as the PPP—the public payer percentage—because it has such a dramatic impact on the overall average yield a practice can achieve per billed ASA unit.

Medicare and Medicaid

The average anesthesia practice has about 25 to 30 percent of all patients covered by Medicare; but, because of the aging American population, this percentage has been gradually increasing at about one percent per year. While the impact of this growth has been a financial challenge to most practices, the growth and current payment rates for most state Medicaid programs has been even more challenging.

As of 2021, 86.3 million people out of a total population of 331.9 million Americans are covered by Medicaid. That is 26 percent, or one person in four. Just to highlight the significance of this percentage, the number of Medicaid patients has increased by 53 percent in ten years. Although state Medicaid programs receive some federal support, each state is responsible for the balance. This can be a major problem, especially in states that are running a budget deficit.

The differences between Medicare coverage and state Medicaid coverage are very significant. While Medicare is, for the most part, a very consistent and reliable payer despite its discounted rates, Medicaid programs are quite complex. If you are over 65 you are eligible for Medicare, but Medicaid eligibility is based on a variety of factors, and eligibility needs to be constantly validated.

Medicaid in Focus

Here is an overview of Medicaid criteria:

To participate in Medicaid, federal law requires states to cover certain groups of individuals. Low-income families, qualified pregnant women and children, and individuals receiving Supplemental Security Income (SSI) are examples of mandatory eligibility groups. States have additional options for coverage and may choose to cover other groups, such as individuals receiving home and community-based services and children in foster care who are not otherwise eligible.  

The Affordable Care Act of 2010 created the opportunity for states to expand Medicaid to cover nearly all low-income Americans under age 65. Eligibility for children was extended to at least 133 percent of the federal poverty level (FPL) in every state (most states cover children to higher income levels), and states were given the option to extend eligibility to adults with income at or below 133 percent of the FPL. Most states have chosen to expand coverage to adults, and those that have not yet expanded may choose to do so at any time.

In other words, the expansion of Medicaid programs has created a significant administrative burden on every state. It is no wonder, therefore, that many patients are becoming disenrolled. In many cases, the patients are simply not understanding and keeping up with the paperwork necessary to keep them enrolled.

The table below demonstrates the variability in payment rates per billed unit of anesthesia. By contrast, many of the practices in these states have negotiated commercial insurance rates that are significantly higher. It should be noted that these are typical payment rates per unit of surgical anesthesia. Payments for obstetric anesthesia are not always based on a simple base value plus time unit formula.

In other words, Medicaid is a program that was developed to provide coverage for low-income patients; but, like the income of the patients, the payments are also low. While it does mean there is payment for the services provided to these patients, the net impact of these programs is not always positive for the average anesthesia practice, and the ultimate concern is that it may get worse.

If you have questions on this topic, please reach out to your account executive.

With best wishes, 

Rita Astani
President—Anesthesia