Medicaid: Medicaid: provider reimbursement--2005. End of Year Issue Brief

Since Title XIX of the Social Security Act was enacted in 1965, state Medicaid programs have operated under tight budget constraints. States have recognized that reimbursement rates, whether traditional fee-for-service rates or capitation rates for managed care providers, must be sufficient in order to ensure that Medicaid programs have enough providers to deliver care. However, states have often looked to save money by lowering payments to providers who deliver health care services to Medicaid beneficiaries. This cost crunch has resulted in provider payment rates that are often substantially below market rates. State legislatures, program administrators and providers have sought to find the proper balance between adequate levels of reimbursement and cost control measures. However, dissatisfaction with low reimbursement levels has caused some providers to cease participating in the Medicaid program. This has had a detrimental affect on Medicaid recipients' access to health services. States have become aware of the problem and have tried to revise their rates to find the elusive balance between adequate reimbursement and fiscal control.