Minnesota Anesthesia Services

Medicaid Reimbursements for Anesthesia

Medicaid, a joint federal and state program, plays a pivotal role in ensuring healthcare access for over 88 million low-income Americans (1). Within the broader landscape of Medicaid, the coverage of anesthesia care is essential to ensure that low-income individuals can afford surgeries, scans, and other procedures. Medicaid covers beneficiaries’ anesthesia expenses by reimbursing the providers according to fixed rates and rules, which have been met with controversy in recent years as several challenges with reimbursements persist (2).

Medicaid reimburses anesthesia providers based on unique rules. In general, Medicaid reimbursements for anesthesia services depend on the sum of the base and time units, multiplied by the conversion factor (3). Base units are derived from the relative value unit (RVU) scale, a point system that determines the value of an individual service compared to all services (3). The units from each CPT code that represents anesthesia activities — e.g., preoperative and postoperative consulting, patient monitoring, administering fluids and blood — are added together (3, 4). Time units, which are unique to anesthesia providers, indicate the amount of minutes the provider spends with the patient as another factor in Medicaid reimbursements, beginning with patient preparation and ending with transfer to postoperative care (3, 4). The final part of the equation, the conversion factor, represents the type of provider, which may include physicians, certified nurse practitioners, and other professionals, depending on state regulations (4). Thus, the basic formula for reimbursement depends on the type of provider, the types and amounts of services, and the time spent with the patient, which altogether equals the “allowable reimbursement” (5).

On top of this base rate, additional charges may be reimbursed. These fees, known to Medicaid as “modifiers” or “special units,” are added to the allowable reimbursement to account for atypical circumstances, such as severely ill patients, complex procedure anesthesia, “unusual anesthesia,” and postoperative pain management (5, 6). Additionally, epidural and subarachnoid anesthesia administration are reimbursed separately (6, 7). Typically, requesting reimbursement for additional services requires filing additional requests with Medicaid (6, 7).

Challenges in this process include low reimbursement rates, administrative burden, and state-by-state variation. First, the Centers for Medicare and Medicaid has decreased the values of conversion factors and base units several years in a row, continuing a trend in decreasing anesthesia reimbursements (8, 9). As a result, Medicaid reimbursement for anesthesia services is significantly lower than both Medicare and private insurance rates (10). Although policies vary by state, average Medicaid reimbursements for anesthesia were only two-thirds of the equivalent Medicare payments in 2019, while private insurer reimbursements were three times higher than Medicare reimbursements (11, 12). Second, the costs and time associated with learning Medicaid procedures, submitting claims, appealing denied claims, and other tasks force a significant administrative burden on patients and providers (13, 14). Third, although Medicaid is guided by the federal government, each state determines its own acceptable reimbursement rates, providers, and modifiers (4, 12). This variation results in confusion, misfiling, and under- or non-payment (12).

In response to these challenges, anesthesia provider organizations have implored the Medicaid program to increase reimbursement rates on the federal and state levels (13, 14). Two crucial arguments in favor of these changes include health equity — as some providers see the challenges of Medicaid as obstacles in serving low-income populations — and pay equity, as Medicaid rates are determined by government policies, whereas private insurer rates are determined on market forces, practice costs, costs of living, and negotiations with providers (11, 15). Although the 2024 Medicaid reimbursement schedules have already been issued, anesthesia organizations will continue advocating for improvements in the future.

References

1: Centers for Medicare and Medicaid Services. 2023. “September 2023 Medicaid and CHIP enrollment data highlights.” Medicaid and CHIP Enrollment Data. URL: https://www.medicaid.gov/medicaid/program-information/medicaid-and-chip-enrollment-data/report-highlights/index.html.

2: Centers for Medicare and Medicaid Services. 2023. “CMS strategic framework.” Centers for Medicare and Medicaid Services. URL: https://www.cms.gov/files/document/cms-strategic-framework-fact-sheet.pdf.

3: American Society of Anesthesiologists (ASA). 2022. “Anesthesia payment basics series #3: payment, conversion factors, modifiers.” ASA Timely Topics in Payment and Practice Management. URL: https://www.asahq.org/quality-and-practice-management/managing-your-practice/timely-topics-in-payment-and-practice-management/anesthesia-payment-basics-series-3-payment-conversion-factors-modifiers.

4: Code of Federal Regulations, 2012. Title 42, section 414.46: Additional rules for payment of anesthesia services. Accessed via Legal Information Institute. URL: https://www.law.cornell.edu/cfr/text/42/414.46.

5: Hudson, J. 2022. “How do anesthesiologists get paid?” Pittsburgh School of Medicine, Department of Anesthesiology. URL: https://www.anesthesiology.pitt.edu/sites/default/files/PDF_Documents/Hudson_Jan2023_web_version.pdf.

6: Centers for Medicare and Medicaid Services. 2023. “Medicaid 2023 coding policies manual: chapter 1.” Medicaid 2023 Coding Policies Manual. URL: https://www.cms.gov/files/document/medicaid-ncci-policy-manual-2024-chapter-1.pdf.

7: Tahiliani, P. 2023. “Anesthesia codes CPT – anesthesia coding cheat sheet.” QWay Healthcare. URL: https://qwayhealthcare.com/blog/anesthesia-codes-cpt/.

8: American Society of Anesthesiologists (ASA). 2023. “CMS finalizes deep cuts to Medicare payments in 2024.” ASA Washington Alerts. URL: https://www.asahq.org/advocacy-and-asapac/fda-and-washington-alerts/washington-alerts/2023/11/cms-finalizes-deep-cuts-to-medicare-payments-in-2024.

9: American Society of Anesthesiologists (ASA). 2023. “Anesthesiologists denounce another round of Medicare payment cuts, urge immediate reforms.” ASA Press Releases. URL: https://www.asahq.org/about-asa/newsroom/news-releases/2023/07/anesthesiologists-denounce-another-year-of-medicare-payment-cuts-urge-immediate-reforms.

10: Astani, R. 2023. “Medicaid coverage trends: impact on anesthesia.” Anesthesia Business Consultants. URL: https://www.anesthesiallc.com/publications/anesthesia-provider-news-ealerts/1583-medicaid-coverage-trends-impact-on-anesthesia.

11: Kaiser Family Foundation (KFF). 2019. “Medicaid to Medicare fee index.” KFF State Health Facts Data. URL: https://www.kff.org/medicaid/state-indicator/medicaid-to-medicare-fee-index.

12: Government Accountability Office (GAO). 2020. “Anesthesia services: differences between private and Medicare payments likely due to providers’ strong negotiating position.” GAO Report to Congressional Committees. URL: https://www.gao.gov/assets/gao-21-41.pdf.

13: Wikle, S., Wagner, J., Erzouki, F. and Sullivan, J. 2022. “States can reduce Medicaid’s administrative burdens to advance health and racial equity.” Center on Budget and Policy Priorities. URL: https://www.cbpp.org/research/health/states-can-reduce-medicaids-administrative-burdens-to-advance-health-and-racial.

14: Maas, S. 2021. “Administrative burdens lead some doctors to avoid Medicaid patients.” National Bureau of Economic Research Digest, no. 12. URL:

https://www.nber.org/digest/202112/administrative-burdens-lead-some-doctors-avoid-medicaid-patients.

15: Clark, R. 2023. “ASA president’s letter to the editor on Medicare payment rates for anesthesia services.” ASA Newsroom. URL: https://www.asahq.org/about-asa/newsroom/asa-in-the-news/2021/11/medicare-payment-rates-lte.