James sat slumped in his seat on the “blue bus,” his face gaunt and his eyes heavy with exhaustion. The bus, a shuttle service for patients, was making its way through the bustling streets of the Mission District ofSan Francisco, carrying James and other low-income patients to San Francisco General Hospital. James, a 45-year-old man with end-stage renal disease, had been on dialysis for the past three years. Despite his regular treatments, his health had been deteriorating rapidly in recent months.

As the bus navigated the city’s steep hills, James reflected on his last visit to the hospital. He had been waiting for months to see a specialist to adjust his kidney medications, but the wait times were excruciatingly long. In the meantime, his condition had worsened, and he found himself being rushed to the emergency room via ambulance, barely conscious and in need of emergent dialysis.

The bus pulled up to San Francisco General Hospital, recently renamed Zuckerberg San Francisco General after donor Mark Zuckerberg who invented Facebook/Meta (and who had donated money to fund a new building). James slowly made his way off, leaning heavily on his cane. He entered the building and headed towards the elevator, nicknamed the “seizure elevator” by patients and staff alike. The elevator doors rapidly seized open and closed, as if the machine was having a convulsion. James sighed, knowing that the elevator had been in disrepair for over a year, a stark reminder of the underfunded and overburdened public hospital system.

As he waited for the emergency room nurse to take his blood pressure, James couldn’t help but think about the stark contrast between his experience and that of patients with commercial insurance or Medicare, who typically took the “gold bus” to the main UCSF Parnassus hospital just a few miles away. There, patients were greeted by the soothing sounds of a harpist in the lobby. They were whisked away to tower rooms with stunning views of Golden Gate Park and the iconic Golden Gate Bridge. Doctors responded promptly to email messages, and wait times for specialists were far lower than at The Zuckerberg.

James’s story is not unique. Across the country, Medicaid patients face significant barriers to accessing timely and high-quality care. The consequences of these barriers can be severe, leading to preventable hospitalizations, increased morbidity, and even premature death. The perversity of the situation lies not only in the danger to patients’ health but also in the staggering costs associated with providing care in this manner.

The treatment James received is far more expensive than routine outpatient medication adjustments. By failing to provide timely access to specialist care, the Medicaid system not only jeopardizes patient health but also places a significant financial burden on taxpayers. This begs the question: how has this become such a common occurrence in Medicaid?

The answer lies in a complex web of factors, including inadequate reimbursement rates, limited provider networks, and the concentration of Medicaid patients in under-resourced facilities. These factors contribute to a system of care segregation, where low-income patients are effectively separated from those with more comprehensive insurance coverage.

James’s story is a stark illustration of the network inadequacy that plagues the Medicaid system. These inadequacies persist due to a combination of factors, including the higher social needs and prevalence of mental health and substance use problems among Medicaid beneficiaries, the greater administrative burdens associated with Medicaid, and the lower reimbursement rates for providers.

Medicaid patients often face a range of social and health-related challenges that can make their care more complex and resource-intensive. They may require additional support services, such as transportation assistance or language interpretation, which can strain provider resources. Additionally, Medicaid beneficiaries have higher rates of mental health and substance use disorders compared to the general population, necessitating specialized care that may be difficult to access due to limited provider networks.

Participating in Medicaid can also involve significant administrative hurdles for providers. The paperwork and documentation requirements can be more onerous than those associated with commercial insurance, leading some providers to limit their participation or opt out entirely. A study conducted in 2021 highlights the complexity of healthcare billing and its economic costs for doctors and consequences for patients. The authors estimate that physicians lose 18% of Medicaid revenue to billing problems, compared with 4.7% for Medicare and 2.4% for commercial insurers. This administrative burden can lead to a phenomenon known as “provider burden” or “moral injury,” where healthcare providers feel overwhelmed and discouraged by the constant battles with insurance companies to secure payment for their services, or feel guilt about not being able to provide standard care for patients receiving Medicaid. As a result, fewer providers may be willing to serve Medicaid patients, exacerbating network inadequacy.

Perhaps most significantly, Medicaid reimbursement rates for providers are consistently lower than those offered by Medicare or commercial insurers. A recent Commonwealth Fund report highlighted the persistent and growing disparities in payment rates across these three payers. In 2019, Medicaid fee-for-service payments for physician services were nearly 30% below Medicare rates, with an even larger gap for primary care services. For hospitals, Medicaid inpatient base payments were 22% lower than Medicare rates, though supplemental payments in some states narrowed this gap.

Several factors contribute to these lower payment rates in Medicaid. As a state and federally funded program, Medicaid’s budget is subject to the financial constraints and priorities of both levels of government. To extend coverage to as many low-income individuals and families as possible within these budgetary limits, Medicaid may keep provider reimbursements low. Additionally, Medicaid rates are often set by individual states, which have varying financial capabilities and political willingness to invest in healthcare funding.

The consequences of these payment disparities are significant. Lower reimbursement rates can deter providers from accepting Medicaid patients, leading to narrower networks and reduced access to care. This can result in a two-tiered system, where Medicaid beneficiaries face longer wait times, fewer provider options, and potentially lower-quality care compared to those with commercial insurance or Medicare. The 2021 study finds that physicians in a state with one standard deviation higher Medicaid reimbursements are around 2 percentage points more likely to accept Medicaid patients, while physicians in a state with one standard deviation higher costs of incomplete payments (CIP, the paperwork, time and technology costs for recouping payments from insurers) are 2 to 2.8 percentage points less likely to accept Medicaid patients. The authors conclude that administrative frictions have first-order costs for doctors, patients, and equality of access to healthcare, and that CIP is just as important as reimbursement rates in explaining variation in physicians’ willingness to treat Medicaid patients.

These disparities also have important implications for health equity. Black and Latinx individuals are disproportionately represented in the Medicaid population, meaning they are more likely to be covered by the program with the lowest payment rates. As such, the Medicaid reimbursement structure can perpetuate racial and ethnic health disparities.

Addressing network inadequacy in Medicaid will require a multi-faceted approach that considers the complex interplay of social needs, administrative burdens, and reimbursement rates. Policymakers must grapple with difficult questions about how to ensure adequate access to care for Medicaid beneficiaries while also managing program costs and navigating political pressures. Strengthening Medicaid access rules and increasing transparency around managed care rates are important steps; a more comprehensive examination of the disparities in our healthcare payment systems is necessary to truly advance health equity and improve care for all. Reducing administrative frictions and costs of incomplete payments could lead to significant economic gains in terms of reduced public spending or increased access to physicians for Medicaid patients. As the 2021 study notes, these potential gains are sizable, underscoring the importance of addressing the administrative complexities that contribute to network inadequacy in Medicaid.

Recent studies published in the journal Health Affairs have shed light on a troubling phenomenon in Medicaid managed care: the prevalence of “ghost networks” or “phantom networks.” These terms refer to provider networks that appear sufficient on paper but do not reflect the actual availability of providers to Medicaid patients. The studies, conducted in Oregon and California, offer valuable insights into the scope and impact of this problem and its implications for health outcomes.

The Oregon study, published in 2022, compared provider directory data from Oregon’s Medicaid managed care program with empirically constructed provider networks based on administrative claims data (healthcare service receipts). The researchers found that 58.2% of providers listed in plan directories, including 67.4% of mental health prescribers and 59.0% of non-prescribing mental health clinicians (therapists), did not see any Medicaid patients during the study period. In other words, these “phantom” providers were not effectively available to provide care to Medicaid beneficiaries, despite being listed in the directories.

The study also revealed significant discrepancies in provider-to-enrollee ratios calculated using directory data versus claims data. For example, the ratio of mental health prescribers per 1,000 enrollees was 4.0 using directory data but only 0.7 using claims data—a more than fivefold difference. These findings suggest that current network adequacy standards, which often rely on provider directory data, may overstate the true availability of providers and fail to ensure adequate access to care.

The California study, published in 2018, used a secret shopper approach to assess the accuracy of provider directories for Medicaid managed care plans in three counties. The researchers found that only 52% of the primary care providers listed in the directories were successfully contacted and accepting new Medicaid patients. The accuracy of directory information varied widely across plans, with rates of successful contact ranging from 38% to 64%. These findings echo those of the Oregon study, highlighting the prevalence of ghost networks and the limitations of relying on directory data to assess network adequacy.

The implications of these findings for health outcomes are significant. When Medicaid patients cannot access the providers listed in their plan’s directory, they may face substantial barriers to receiving timely and appropriate care. Delays in care can lead to worsening symptoms, avoidable hospitalizations, and poorer health outcomes.This is particularly concerning for patients with mental health needs, given the high prevalence of phantom providers among mental health prescribers and clinicians.

The Oregon study found that the percentage of providers who were “listed and accessed” (i.e., not phantom providers) was lower for mental health prescribers (32.6%) and non-prescribing mental health clinicians (41.0%) compared to primary care providers (46.0%). This suggests that access to mental healthcare may be particularly com-promised by the prevalence of ghost networks. Given the high rates of mental health conditions among Medicaid beneficiaries, this lack of access could have severe consequences for patient outcomes and overall health system costs.

The California study also highlighted the potential impact of ghost networks on health disparities. The researchers found that the accuracy of provider directories was lower in counties with higher proportions of Latinx residents and Spanish-speaking residents. This suggests that ghost networks may disproportionately affect communities of color and those with limited English proficiency, exacerbating existing health disparities.

Both studies point to the need for more accurate and reliable provider directory information to ensure that Medicaid patients can access the care they need. The Oregon study authors note that “significant discrepancies between the providers listed in directories and those whom enrollees can access suggest that provider network monitoring and enforcement may fall short if based on directory information.” Similarly, the California study authors conclude that “the inaccuracy of provider directories raises concerns about access to care for Medicaid managed care beneficiaries and the validity of network adequacy standards based on these directories.”

The findings also underscore the importance of using multiple datasources and methods to assess network adequacy and access to care. While provider directories are an important tool for patients and regulators, they may not provide a complete or accurate picture of provider availability. The Oregon study demonstrates the value of using administrative claims data to empirically construct provider networks and compare them to directory listings. The California study highlights the role of secret shopper methods in assessing the real-world accessibility of providers.

Ultimately, the ghost network phenomenon revealed by these studies has serious implications for the health and well-being of Medicaid patients. When patients cannot access the care they need in a timely and appropriate manner, they are at risk of experiencing worse health outcomes, higher rates of hospitalization and emergency department use, and increased overall healthcare costs. Addressing this problem will require a concerted effort from policymakers, plans, providers, and patient advocates to ensure that provider networks are truly available and accessible to Medicaid patients.

The insights from the Oregon and California studies provide a valuable foundation for this work, highlighting the scope and impact of ghost networks as well as the need for more accurate and reliable provider directory information. By shedding light on this critical issue, these studies can inform efforts to improve network adequacy, access to care, and health outcomes for Medicaid patients. As the authors of the Oregon study conclude, “Enforcement of network adequacy standards should evolve to ensure that plan networks are evaluated on the basis of whether they include physicians who are both valued by Medicaid beneficiaries and willing to treat them.”

Network inadequacy in Medicaid has not gone unnoticed; indeed the federal and state governments have been working on the issue for years. Among the more famous—and controversial—strategies to improve access to care for people with Medicaid is the famous 340B program.

The 340B Drug Pricing Program was created by Congress in 1992 with the noble intention of helping safety-net providers stretch limited resources to better serve vulnerable patient populations receiving Medicaid or those who are uninsured. Under the program, drug manufacturers participating in Medicaid are required to provide outpatient drugs to eligible healthcare organizations at significantly reduced prices, typically 20-50% below average. The idea was that by receiving steep discounts on drugs, these providers would be able to expand access to comprehensive services for patients receiving Medicaid and uninsured patients, essentially using a subsidy on medications to fund overall availability of medical services.

For clinics operating on razor-thin margins, those savings can make the difference between keeping the doors open or shutting down. The National Association of Community Health Centers claims the 340B program has enabled many health centers, which serve 1 in 11 people in the U.S., to stay afloat, provide care to more patients, and expand services.

However, despite anecdotal success stories, there are growing questions about whether the 340B program as a whole is achieving its stated goals. That’s because the legislation that created 340B provided little guidance or restrictions on how covered entities can use the revenue generated from the program. There is no requirement that 340B savings be used to benefit low-income or vulnerable patients. Entities can essentially use the money however they want.

Critics argue this lack of oversight and transparency has allowed 340B to morph into a revenue-generating scheme for hospitals, without demonstrating improvements in access or quality of care for disadvantaged populations. The number of hospitals participating in 340B has skyrocketed in recent years, from 583 in 2005 to 2,541 in 2019. Total discounted drug purchases under the program ballooned from $6 billion in 2010 to $24.3 billion in 2018. Yet charity care provided by 340B hospitals actually declined during this period of rapid expansion.

So where is all that 340B money going if not to help patients in need? The Government Accountability Office found that in 2012, the most common use of 340B revenue by hospitals was to expand outpatient services. But the GAO could not determine “the extent to which patients benefit from these service expansions.” Another study discovered that 340B hospitals tended to open clinics in higher-income communities, not low-income neighborhoods ostensibly targeted by the program.

Evidence that the 340B program directly improves medication access is also mixed. One analysis found that 340B hospitals provide 25% of the nation’s uncompensated care and 36% of unreimbursed Medicaid services, suggesting they do serve as important safety-net providers. The same study determined that 340B hospitals have 40% lower outpatient drug costs per patient compared to non-340B hospitals.

However, other research casts doubt on whether 340B translates to better access for low-income patients. A 2021 American Journal of Managed Care study compared changes in provision of uncompensated care among 340B hospitals to changes among non-340B hospitals. It found no evidence that 340B hospitals increased their provision of uncompensated care or shifted patient mix toward low-income patients compared to non-340B hospitals.

Another concerning trend is that 340B may create incentives for participating hospitals to prescribe more drugs or more expensive drugs than medically necessary. Because 340B discounts are percentage-based, the more expensive drugs prescribed, the more fees generated for the hospital when patients fill prescriptions at contract pharmacies. An analysis by the Community Oncology Alliance found that average drug spending per oncology patient was $7,758 higher at 340B hospitals compared to community cancer clinics.

The 340B program has undoubtedly helped many safety-net providers stay afloat and care for patients with limited means. But the program’s explosive growth, coupled with lack of oversight and evidence of hospitals gaming the system for financial gain, makes it ripe for reform. Policymakers should consider updating 340B hospital eligibility criteria to ensure participating facilities are true safety-net providers that expand access to Medicaid and uninsured patients. They should also mandate that a certain portion of 340B revenue be used to benefit low-income patients, either through subsidized drugs, free clinics, or other charitable activities. More transparency around how 340B dollars are spent would shed light on whether this important program is fulfilling its mission to help the underserved or simply boosting hospital bottom lines.

With lessons we’ve learned from programs like 340B, what does the research indicate as potential solutions to Medicaid network inadequacy more broadly? Addressing the complex challenges of network inadequacy in Medicaid will require a multifaceted, collaborative approach that engages policymakers, healthcare providers, managed care organizations, and patient advocates. While there is no simple solution, several strategies have the potential to improve access to care for Medicaid beneficiaries and create a more equitable healthcare system.

1. Increase Medicaid Reimbursement Rates

One of the most direct ways to improve network adequacy in Medicaid is to increase reimbursement rates for providers. As the Commonwealth Fund report and other studies have shown, the persistent disparities in payment rates between Medicaid, Medicare, and commercial insurers are a significant deterrent for providers considering participation in Medicaid. By closing this gap, states can create a more attractive financial environment for providers and encourage greater participation in Medicaid networks.

However, increasing reimbursement rates is not a panacea. States must balance the need to attract providers with the fiscal realities of their Medicaid budgets. One potential approach is to target rate increases to specific provider types or geographic areas where network inadequacy is most acute. For example, states could offer enhanced payments for mental health providers or primary care physicians practicing in underserved rural areas. This targeted approach could help to address the most pressing access challenges while managing overall program costs.

2. Streamline Administrative Processes

Reducing the administrative burdens associated with Medicaid participation is another key strategy for improving network adequacy. As the 2021 study highlighted, the complexity of healthcare billing and the high costs of incomplete payments can discourage providers from accepting Medicaid patients. By simplifying and standardizing administrative processes, such as claims submission and prior authorization, states can reduce the time and resources providers must devote to navigating Medicaid bureaucracy.

One promising approach is to leverage technology to create more efficient and user-friendly systems for providers. For example, states could invest in electronic health record systems that integrate with Medicaid claims processing, reducing the need for manual data entry and minimizing errors. They could also develop online portals that allow providers to easily check patient eligibility, submit claims, and track payment status. By making it easier for providers to engage with the Medicaid program, states can help to reduce administrative barriers to participation.

3. Strengthen Network Adequacy Standards and Enforcement

Improving network adequacy in Medicaid will also require a closer examination of the standards and enforcement mechanisms used to ensure that managed care organizations (MCOs) are meeting their contractual obligations. There is a need to balance flexibility and accountability in network adequacy standards, particularly for mental healthcare access.

One potential strategy is to move beyond traditional time and distance standards (specifying how far in minutes and miles a provider is from a patient’s home) and adopt a more comprehensive set of metrics that capture the actual availability and accessibility of providers. This could include measures such as secret shopper appointment success rates, provider-to-enrollee ratios, appointment wait times, and patient satisfaction scores. By using a more holistic approach to network adequacy, states can better ensure that Medicaid beneficiaries have access to the care they need, when they need it.

However, adopting stronger standards is only effective if they are backed by robust enforcement mechanisms. States must be willing to hold MCOs accountable for meeting network adequacy requirements and impose meaningful consequences for noncompliance. This could include financial penalties, such as with holding a portion of capitation payments, or even termination of contracts in cases of repeated or egregious violations. By sending a clear message that network adequacy is a priority, states can create a stronger incentive for MCOs to invest in provider recruitment and retention.

4. Increase Transparency and Public Reporting

Increasing transparency around Medicaid managed care networks is another critical strategy for improving access to care. As the Health Affairs studies revealed, the prevalence of “ghost networks”or “phantom networks” can create significant discrepancies between the providers listed in directories and those actually available to Medicaid patients. This lack of transparency can frustrate patients, discourage provider participation, and undermine efforts to ensure network adequacy.

To address this challenge, states should require MCOs to regularly update and verify their provider directories, using a standardized format that includes key information such as provider specialties, locations, and acceptance of new Medicaid patients. States could also invest in centralized, online directories that allow patients to easily search for and compare providers across different MCOs. By making it easier for patients to navigate the Medicaid system and find available providers, states can help to reduce barriers to access and improve patient satisfaction.

Public reporting of network adequacy metrics is another important tool for increasing transparency and accountability. States should regularly collect and publish data on the availability and accessibility of providers in Medicaid managed care networks, using a range of metrics that capture the patient experience. This could include measures such as the percentage of providers accepting new Medicaid patients, the average wait time for appointments, and patient-reported access to care. By making this information publicly available, states can help to identify areas of strength and weakness in Medicaid networks and create pressure for improvement.

5. Invest in Workforce Development and Support

Finally, improving network adequacy in Medicaid will require along-term investment in workforce development and support. The shortage of healthcare providers, particularly in mental health and primary care, is a significant contributor to access challenges in Medicaid. By increasing the pipeline of providers and creating amore supportive practice environment, states can help to build amore robust and sustainable Medicaid workforce.

One potential strategy is to expand training and loan forgive-ness programs for healthcare providers, with a focus on those specialties and geographic areas where shortages are most acute. This could include increasing funding for medical and nursing schools, creating more residency and fellowship positions in underserved areas, and offering loan repayment or scholarship programs for providers who commit to practicing in Medicaid. States could also invest in programs that support mid-level providers, such as nurse practitioners and physician assistants, who can help to fill gaps in primary and specialty care.

In addition to increasing the supply of providers, states must also create a more supportive practice environment that encourages long-term participation in Medicaid. This could include offering technical assistance and resources to help providers navigate the Medicaid system, providing opportunities for peer support and mentorship, and investing in provider wellness programs to reduce burnout and turnover. By creating a more positive and sustainable practice environment, states can help to attract and retain a dedicated Medicaid workforce.

Improving network adequacy and access to care in Medicaid is a complex and multifaceted challenge that requires sustained effort and collaboration from all stakeholders. While there is no one-size-fits-all solution, the strategies outlined above offer a road-map for progress. By increasing reimbursement rates, streamlining administrative processes, strengthening network adequacy standards and enforcement, increasing transparency and public reporting, and investing in workforce development and support, states can create a more equitable and accessible Medicaid system that truly serves the needs of its beneficiaries.