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Medicaid and Rural Health

Medicaid is a joint federal/state assistance healthcare coverage program. It covers healthcare and long-term care services for individuals and families with low incomes and resources, as well as those with disabilities. Although the program is funded from both state and federal monies, it is designed and administered by the state governing bodies, resulting in variability between states in terms of implementation, covered services and reimbursement rates.

Medicaid enrollment has increased over the past several years due to both the economic recession of 2008 as well as the implementation of provisions in the Affordable Care Act. According to the Kaiser Family Foundation's 2014 publication, Medicaid Enrollment: December 2013 Data Snapshot, the Medicaid program serves 55.4 million people. The Affordable Care Act and Insurance Coverage in Rural Areas finds that a higher proportion of rural residents (21%) are covered by Medicaid than urban residents (16%).

Medicaid policy has broad implications for individuals, healthcare providers, and communities. It addresses a health insurance coverage gap left between Medicare and private coverage. Rural healthcare providers, especially those who serve large percentages of Medicaid patients, rely on Medicaid payments to cover the costs of treatment and remain financially viable. Therefore, Federal and state Medicaid dollars contribute to rural economies by generating healthcare jobs and other businesses and services.

Frequently Asked Questions

What services are covered by Medicaid?

State Medicaid programs provide a range of mandatory services, but can also provide an array of “optional” services. States are not able to vary benefits by geographic area or by eligibility category without a Federally-approved waiver.

According to Medicaid: A Primer, Kaiser Family Foundation (2013), state Medicaid programs are generally required to cover:

  • Physician, midwife, and nurse practitioner services
  • Hospital services (inpatient and outpatient)
  • Laboratory and x-ray services
  • Early and periodic screening, diagnostic, and treatment (EPSDT) services for individuals under 21
  • Federally-qualified health center and rural health clinic services
  • Family planning services and supplies
  • Home healthcare services for individuals 21 and older
  • Transportation to medical care
  • Tobacco cessation counseling for pregnant women

Optional services provided by state Medicaid programs might include dental care, physical therapy, home and community-based services, and many other services. For a full list of optional services, please visit the Centers of Medicare and Medicaid website.

What types of challenges do rural providers face related to service provision to Medicaid enrollees?

The Patient Protection and Affordable Care Act of 2010: Impacts on Rural People, Places, and Providers: A Second Look identifies the following challenges rural facilities face regarding Medicaid changes under ACA:

  • Although many states will provide more extensive insurance coverage through Medicaid to a greater number of individuals and families, this does not guarantee access. Many rural areas still face the difficulty of having a limited number of providers.
  • States not currently expanding Medicaid have higher rates of rural residents who are uninsured who would qualify for Medicaid, if expanded.

Other, more general concerns include:

  • Heavy reliance of some rural providers on Medicaid due to higher numbers of Medicaid enrollees creates risk and dependency on the program for the facility
  • Payment inadequacy for some services in some states
  • Outreach challenges for reaching Medicaid-eligible rural populations
  • Adequate workforce, such as mental health professionals, to meet the needs of Medicaid recipients.

New approaches are being formed and tested through offices such as the CMS Center for Medicare and Medicaid Innovation. This is a venue to explore alternative approaches to Medicare and Medicaid, but a challenge exists for rural communities: fewer patients. Few programs are specifically designed for rural communities and challenges with evaluating results in low-volume environments limit rural providers' ability to participate in pilot programs.

How does Medicaid impact rural healthcare and the economy?

In many ways, Medicaid plays a larger role in rural than in urban America. Compared to the rest of the nation, Medicaid provides coverage at a higher rate to people in rural areas. Rural providers are particularly reliant on Medicaid payments, which account for over 14% of rural hospitals' gross revenues. In addition, nearly one-third of rural physicians get a quarter or more of patient revenues through Medicaid reimbursement, according to The Current and Future Role and Impact of Medicaid in Rural Health.

Medicaid plays a large role in financing long-term care for disabled and elderly residents. According to Medicaid and Its Importance to Rural Health:

“In 2003, Medicaid financed 40% of the $151 billion spent nationally on long-term care. Nursing facility beds are more plentiful in rural areas, and a higher percentage of rural elderly are admitted to these facilities.”

This same publication argues that there are four major populations that are particularly reliant upon Medicaid and they are overrepresented in rural areas. These are:

  • Low-income disabled
  • Low-income elderly
  • Children
  • Pregnant Women

Additionally the report states that

“Medicaid contributes to rural economic development in four important ways:

  1. providing opportunity for access to healthcare services, which in turn influences health status and therefore productivity and quality of life of citizens;
  2. providing patient revenue that helps retain health professionals;
  3. supporting the social services infrastructure; and
  4. contributing to the economy through revenue and jobs it generates.”

Findings in a 2013 Rural and Remote Health article Examination of the Relative Importance of Hospital Employment in Non-Metropolitan Counties Using Location Quotients concluded that hospital employment in rural communities is higher than would be expected in the absence of public programs, such as Medicare and Medicaid.

How does Medicaid Expansion (and the alternatives) affect rural healthcare facilities and the health of rural people?

Medicaid is critical to rural healthcare providers and as such, any change is sure to have an impact on rural communities. Passage of the ACA, and a subsequent Supreme Court ruling, has resulted in a situation where each state must determine whether it will expand Medicaid coverage to include individuals between the ages of 19 and 65 with incomes up to 138% Federal Poverty Level (FPL).

Medicaid expansion brings with it the opportunity to significantly impact the health of lower-income rural residents, as well as rural healthcare facilities, but it is difficult to predict the impact it will have. The Patient Protection and Affordable Care Act of 2010: Impacts on Rural People, Places, and Providers: A Second Look describes the opportunity of Medicaid expansion to provide access to rural people, but suggests there will be variation in enrollment outreach among those states. The report Modernizing Rural Health Care: Coverage, Quality and Innovation argues that Medicaid expansion under the ACA has the capability of covering around 5.4 million rural residents. However, The Affordable Care Act and Insurance Coverage in Rural Areas report concludes that two-thirds of rural residents without health insurance live in states that are not expanding coverage through Medicaid expansion.

The flexibility in states' ability to expand Medicaid has widened the urban-rural disparity in insurance coverage, according to How Does Medicaid Expansion Affect Insurance Coverage of Rural Populations?:

“The variation in state implementation of Medicaid expansion (allowed by the Supreme Court ruling on Medicaid expansion) disproportionately affects rural populations, as fewer rural states have expanded Medicaid, and states with higher poverty in rural areas are least likely to expand.”

Which states are expanding Medicaid?

The Kaiser Family Foundation maintains an updated list, Status of State Action on Medicaid Expansion Decision, which provides information on which states are expanding, not expanding, or still considering Medicaid expansion.

How are states using Medicaid policies to provide coordinated care management in rural communities?

Many states, particularly rural states with resource-limited medium and small primary care practices, are looking for opportunities to reduce healthcare costs.  Medicaid policy supports the development of community health teams, with members in a breadth of disciplines, supporting primary care physicians in their care of patients with complex illnesses.  A report from the Commonwealth Foundation, Care Management for Medicaid Enrollees through Community Health Teams, examines eight states, most with large rural populations, which have utilized Medicaid funding or a combination of Medicaid and other insurance payers, to create Community Health Teams and Medical Homes.  Findings from this examination show that:

  • There are reasons to believe these community health teams reduce cost.
  • Community health teams also increase capacity of small practices to address challenges outside of primary care or that demand unique care such as behavioral health, chronic illness and social needs.
  • Due to strong community links, community health teams can meet federal home health criteria and receive federal funding.

How important is Medicaid reimbursement policy for telehealth implementation in rural communities?

Telehealth technology has the potential to change the landscape of rural healthcare. However, as is the case with many new technologies, federal and state regulations are not yet uniform, and there are significant variations between state reimbursement policies. According to the Center for Connected Health Policy's (CCHP) 50-state analysis of State Telehealth Laws and Reimbursement Policies, Medicaid programs in forty-nine states and Washington, D.C. provide reimbursement in some form for telehealth services. Only Massachusetts is without written Medicaid reimbursement policies for telehealth services. Although most states reimburse to some degree for telehealth services, no two states reimburse at the same rate or for the same services.

These six examples of telehealth reimbursement demonstrate state variation:

  • With every state offering some type of it, live video is the most predominantly reimbursed form of telehealth. State-to-state variation in what and how this is reimbursed still exists here.
  • Store-and-forward is a telecommunications practice where information is sent to a destination provider where it will be viewed at a later time. Most states reimburse for ‘real-time’ operations, and do not cover store-and-forward. 
  • Reimbursement for remote patient monitoring (RPM) is a technique to extend healthcare access for which twenty states' Medicaid programs will reimburse. Like the other services being reimbursed, this too comes with a variety of restrictions. One example is only offering this reimbursement for home health agencies. This type of restriction has a practical limitation on effectiveness in rural communities.
  • Reimbursement for email/phone/fax is rarely offered unless they are in conjunction with another telehealth system.
  • Thirty-two states will reimburse transmission, facility fees, or both.
  • Some states have restricted reimbursement of telehealth services to those provided in rural and underserved areas, though this practice is decreasing.

The variation in telehealth payment policy is having and will continue to have a direct impact on the efficacy of Medicaid in rural communities.

For more information on telehealth in rural communities, please the complete Telehealth Use in Rural Healthcare topic guide.

Who can I contact for assistance and questions about Medicaid regulations?

For technical, policy, and operational assistance on rural health issues including CMS regulations contact:

CMS Regional Office Rural Health Coordinators

Last Reviewed: 11/20/2014