Saving rural psychiatry services will require higher Medicaid payments

If there were ever to be an empty bed in the stress unit my psychiatrist dad manages, I’m certain he would admit himself. He runs the only private psychiatric practice in the rural Michigan town of Owosso and is the sole psychiatrist contracted at the local hospital. With approximately 1 in every 10 of the town’s 15,000 residents being a patient in his practice, he shoulders the responsibility for many more patients than most psychiatrists do. The issue isn’t confined to his town. Across the nation, half of the population resides in areas with an inadequate number of mental health professionals, and 65% of rural counties lack access to a psychiatrist entirely.

Why are so few psychiatrists working in rural areas? Medicaid is to blame. The majority of the patients my dad treats at the clinic are low-income and rely on the government-funded Medicaid program, which pays him between $60 and $70 per 30-minute visit, depending on the type of policy and care provided. Compare that to the up to $120 that private insurers pay. Because of this disparity, only 36% of psychiatrists accept new Medicaid patients, compared to 70% of physicians overall, prioritizing mental health care for privately insured patients with higher incomes.

Having a highly Medicaid-dependent patient panel makes it almost impossible for a psychiatrist to financially support their practice. Instead, most choose to practice in urban settings where more people are covered by private insurance enrollment, making the business more lucrative. Unfortunately, in rural towns, even private insurance poses its challenges. The patients with private insurance at my dad’s clinic rarely meet their high deductibles, leaving them with bills they simply can’t afford out of pocket. For this reason, rural clinics rely on Medicaid for their viability, which is surprising but understandable as Medicaid reliably sends payments while private insurance collectors press clients to pay their accumulating copays.

My dad sees the town’s mental health burden as his duty to bear. He writes off copays while juggling the cost of two physician assistants (whom he pays as much as he pays himself), a therapist, two secretaries, and other administrative fees. From 2019 to 2022 the practice lost $55,000. Without the financial cushion of his hospital salary to offset the loss, the practice would shut down.

My dad explained to me that his office space once housed a dermatologist who moved his business 30 minutes away to Flint, Mich., a city over five times the size of Owosso. Was Flint, of all places, better than Owosso? The whole country knows of Flint’s water crisis, which made national headlines, and soon after, thousands of U.S. areas were found to also have lead-contaminated water. Still, a physician would rather escape there than remain in rural America.

Even with excessively large patient panels, Medicaid alone is not enough to keep rural private psychiatric practices alive. Without them, the rural mental health care system would collapse. This is not just about the 15,000 people in one small town reliant on my dad, but the 60 million in rural America facing similar, if not worse, conditions. Unless Medicaid raises its payments to rural psychiatrists, mental health clinics across the heartland will disappear, and with it the mental health care for the patients they serve.

While Medicaid reimbursement rates tend to be higher in rural areas compared to other parts of the state, they still fall short of competing with private insurance rates. These government rates hinge on various factors such as location, type of service, and provider expertise, and due to Medicaid’s federal-state partnership, they vary significantly from state to state. For instance, if my dad schedules a patient to see the employed therapist for a 60-minute therapy session, the practice would be reimbursed $69.89. However, in neighboring Midwestern states like Illinois and Ohio, the same service fetches reimbursement rates of $100.60 and $102.31, respectively. Such disparities can have detrimental implications: Low rates in some states can discourage providers from accepting Medicaid patients, thus limiting access for those most in need.

Efforts have been made to bolster reimbursement rates for mental healthcare services through state and federal funding. However, these stopgap measures have not made substantial improvements to Medicaid that significantly benefit providers. The U.S. Senate Committee on Finance passed legislation introduced by Michigan Sen. Debbie Stabenow (D) in 2023 aimed at addressing behavioral health workforce shortages, including reimbursement rates. Yet these adjustments may not be robust enough to sustain rural private practices.

Nadir Al-Saidi recently graduated from Harvard Medical School with a master’s in media, medicine, and health. Later this year, he will start as a medical student at Central Michigan University. His passions lie in advancing rural health and exploring the intricacies of neuroscience and mental wellness.

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