Why My Pediatric Practice Cannot Survive on Good Vibes and Medicaid Reimbursement
Several times a year, I have some version of this conversation:
“We had a change in insurance. Do you take Medicaid?” And I hate answering it, because the question usually arrives after someone has lost a job, changed jobs, gotten divorced, had an employer decide that health insurance is now a luxury add-on like heated seats, or otherwise been launched into America’s fun little administrative obstacle course.
The short answer is: I wish I could.
The longer answer is: I cannot keep an independent pediatric office open by accepting Medicaid alone, because optimism does not pay the rent. Shocking, I know. Capitalism remains deeply committed to ruining everyone’s afternoon.
This is not about whether children with Medicaid deserve excellent care. They do. It is not about whether Medicaid is “bad insurance.” It is insurance, and for many children it is the only thing standing between them and no coverage at all. The problem is that the system often pays primary care clinicians too little, and makes getting paid unnecessarily difficult.
Let’s do the rude math:
A pediatric office is not just a doctor in a room, heroically diagnosing ear infections with a stethoscope and a dream. There are receptionists, nurses, medical assistants, billing staff, rent, utilities, malpractice insurance, electronic medical records, vaccines, refrigerators for the vaccines, supplies, equipment, phone systems, software subscriptions, credentialing, payroll taxes, cleaning, and the occasional printer that senses human despair and jams out of spite.
Medical practice overhead is commonly around 55 to 60 percent of collections. So if an office collects $100, roughly $55 to $60 may already be committed to keeping the lights on, paying staff, and preventing the vaccine refrigerator from becoming an expensive decorative cabinet.
Now look at Medicaid reimbursement: Nationally, Medicaid fee-for-service physician payments have averaged about two-thirds of Medicare rates, although payment varies substantially by state and service. A 2024 fee analysis found Medicaid physician fees were approximately 71 percent of Medicare overall and roughly 69 percent for office visits.
And Medicare is not private insurance. It is not the glamorous penthouse of reimbursement. Comparing Medicaid to commercial payment is often less “a little lower” and more “please enjoy this coupon for half a granola bar.” So when people say Medicaid may pay something like 35% to 55% for a visit that private insurance might reimburse at a substantially higher amount, that is not a physician being dramatic. That is the business model quietly setting itself on fire.
The “break-even” fantasy:
Let’s say a practice gets paid $50 for a visit from Medicaid, vs, $100 from private insurance.
The overhead is still 60 percent of $100, or equal to $60. Therefore $50 is immediately spoken for before the physician earns a dime. That leaves NEGATIVE $10 to cover the actual physician’s work: reviewing records, seeing the patient, counseling the family, documenting, coding, reviewing labs, responding to portal messages, calling specialists, signing forms, and perhaps eating lunch sometime before the sun explodes.
That is assuming the claim gets paid cleanly, which is adorable.
Research summarized by the National Bureau of Economic Research found that physicians lost an estimated 17.4 percent of Medicaid claim value to billing problems, compared with 4.9 percent for Medicare and 2.8 percent for commercial insurance. In other words, Medicaid does not merely pay less; it can also require extra bureaucratic calisthenics for the privilege.
Nothing says “please care for vulnerable children” quite like a denial notice asking you to resubmit a claim in triplicate, under a full moon, using a billing code that was discontinued during the Obama administration.
“But doctors should care about kids:”
Yes. We do. That is why many of us went into pediatrics, a field famous for high emotional rewards and the financial thrill of being asked to work for stickers.
Caring about children and running a financially viable clinic are not opposites. In fact, they must coexist. If the clinic closes because it cannot pay staff, afford rent, buy vaccines, or keep the doors open, then it is available to precisely zero children, regardless of how noble everyone feels about that outcome.
Low Medicaid payment has been recognized by the American Academy of Pediatrics as a barrier to pediatrician participation and therefore to children’s access to timely care. Higher payment is associated with greater pediatrician participation in Medicaid, which is not exactly mysterious: when a practice can cover its costs, it can keep seeing patients.
What I wish the question meant:
When a family asks whether I take Medicaid, what I hear is not, “Can you explain payer contracts to me?”
I hear: “Please don’t make us start over with someone new.” “Please keep caring for my child.” “Please don’t make this insurance disaster become a medical-care disaster too.”
And that is the part that sucks.
Families should not lose access to a trusted pediatrician because their insurance changed. Pediatricians should not have to choose between caring for children with public insurance and keeping their staff employed. Those are policy failures, not personal failures by families or physicians.
So no, I do not say “I don’t take Medicaid” because I think Medicaid patients are less deserving of care. I say it because an independent office cannot remain open on reimbursement that may fail to cover the actual cost of delivering the visit, especially once the billing goblins have taken their cut.
If we want more pediatricians to accept Medicaid, the answer is not guilt. The answer is payment that covers the real cost of care, fewer administrative traps, and a system that stops pretending that pediatric offices run on compassion alone.
Compassion is lovely. Unfortunately, the vaccine fridge is still insisting on electricity.
Sources
Medicaid and CHIP Payment and Access Commission (MACPAC). “Provider Payment and Delivery Systems.”
https://www.macpac.gov/medicaid-101/provider-payment-and-delivery-systems/
Skopec, L., et al. “Medicaid Physician Fees Still Lag Behind Medicare.” Health Affairs Scholar, 2025.
https://pubmed.ncbi.nlm.nih.gov/40324136/
American Academy of Pediatrics. “Medicaid Payment.”
https://www.aap.org/en/advocacy/state-advocacy/medicaid-payment/
National Bureau of Economic Research. “Administrative Burdens Lead Some Doctors to Avoid Medicaid Patients.” 2021.
https://www.nber.org/digest/202112/administrative-burdens-lead-some-doctors-avoid-medicaid-patients
Agency for Healthcare Research and Quality. “Differences in Payments for Child Visits to Office-Based Physicians.” Medical Expenditure Panel Survey Statistical Brief No. 504, 2018.
https://meps.ahrq.gov/data_files/publications/st504/stat504.shtml
KFF. “How Much More Than Medicare Do Private Insurers Pay? A Review of the Literature.” 2020.
https://www.kff.org/medicare/how-much-more-than-medicare-do-private-insurers-pay-a-review-of-the-literature/
Centers for Medicare & Medicaid Services. “Review of Physician Practice Expense Geographic Adjustment Data.”
https://www.cms.gov/files/document/pope3-06pdf