1. Bindman, Andrew B. MD
  2. Yoon, Jean MHS
  3. Grumbach, Kevin MD


Abstract: Physician participation rates in Medicaid vary widely across the country, and, overall, there has been a decline in recent years. We performed an evaluation in California of whether the expansion of Medicaid managed care and a physician payment increase were associated with an increase over time in the percentage of physicians caring for Medicaid patients. Surveys performed before and after these strategies were used did not reveal an increase over time in physicians' participation in California's Medicaid program. Budgetary constraints will force policy makers to confront the priorities of the Medicaid program, to question the policy objectives for physician participation in Medicaid, and to consider more far-reaching reforms in Medicaid and the overall health care system.


PHYSICIAN PARTICIPATION in Medicaid is not mandatory, but it is critical for ensuring that beneficiaries gain timely access to medical services. Physician participation rates in Medicaid vary widely across the country, and overall, there has been a decline in recent years. Nationally, 85.4% of physicians participated in 2001, but most of these participating physicians had few Medicaid patients and received less than 10% of their practice revenue from Medicaid (Cunningham, 2002). A more recent survey suggests that the percentage of physicians nationally who accept no new Medicaid patients increased from 26% to 31% between 1999 and 2001 (Schoenman, 2003). Past studies have documented lower rates of physician participation in association with program characteristics, such as low reimbursement levels, burdensome paperwork, and capitation (Berman et al., 2002; Perloff et al., 1995).


California's Medicaid program, Medi-Cal, is the nation's largest state program, yet it has one of the lowest reported rates of physician participation. Medi-Cal provides health insurance to more than 5 million low-income, disabled, and elderly Californians (State of California Department of Finance, 2001). In 1996 only about half of California physicians reported that they had any Medi-Cal patients in their practice (Bindman et al., 2002).


Beginning in the mid-1990s California implemented two major strategies in an attempt to improve physician participation in Medi-Cal. First, like many other states, California adopted Medicaid managed care. Medicaid managed care grew rapidly in many states in the 1990s with the hope that it would attract an increased number of physicians by providing them with a dependable revenue stream of enrolled patients and a reduction in billing paperwork through capitated payments. In 1996 only 24% of California's Medi-Cal beneficiaries were enrolled in managed care; by 2001 this had more than doubled to 51%. Most of this expansion occurred because it became mandatory for women and children who were eligible for Medi-Cal through the temporary assistance to needy families (TANF) program. Second, California-which has traditionally had among the lowest Medicaid physician reimbursement rates in the nation-implemented in August 2000 a fee increase that raised physician Medi-Cal payments from an average of 57.7% to 65.2% of the average Medicare payment in California (Menges et al., 2001). These increases were not distributed across the board; rather, they were targeted at services where Medi-Cal fees lagged the farthest behind Medicare fee levels. Fees for a typical office visit for an established patient increased from approximately $18 to $24.


To evaluate whether expansion of Medi-Cal managed care and increases in Medi-Cal physician payments were associated with increases in physicians' participation in the program, a series of cross-sectional surveys of physicians in California were conducted between 1996 and 2001. Since the strategies California used to increase physician participation in its Medicaid program over time are similar to those deployed elsewhere, the results of this study are not only relevant for California but also for other states that are attempting to accomplish the same goals in their Medicaid programs.