California to Repay Loans of Docs Who Take Medicaid Patients

Ken Terry

July 11, 2019

California has launched a program that will repay young doctors' medical school loans if they agree to carry a caseload 30% of which consists of patients on Medi-Cal, the state's Medicaid program.

This year, the CalHealthCares program will repay student loans totaling $58.6 million for 247 physicians in 40 specialties, including pediatricians, psychiatrists, and obstetrician/gynecologists, according to a news release from the California Department of Health Care Services (DHCS), which administers Medi-Cal.

These physicians were selected from more than 1300 who applied to the program.

The state will pay off loans of up to $300,000 over a 5-year period. That's the same amount of time for which the recipient doctors have committed to caring for underserved patients.

This is the first of five rounds of awards to doctors and dentists from the CalHealthCare program. The DHCS will start accepting applications for the next round in January.

The money for the loan repayment is coming from an increase in the state tobacco tax that took effect in 2017, according to the Sacramento Bee. The following year, the legislature established the loan repayment program and appropriated $220 million for it. Gov. Gavin Newsom added $120 million to CalHealthCares in his recently approved 2019–2020 budget.

Physician Shortage

California is not doing this just to help physicians. It desperately needs more doctors to serve the growing Medi-Cal population, which includes 1 in 3 Californians. The expansion of Medi-Cal under the Affordable Care Act added about 4 million people to the rolls, according to a news story on the website of KQED, a public radio station in northern California.

Medi-Cal also covers about 200,000 undocumented children. The recently enacted state budget includes funding for Medi-Cal coverage of nearly 100,000 undocumented adults.

Many Medi-Cal beneficiaries have difficulty obtaining access to care. One reason for this is that there aren't enough physicians in the poverty-stricken areas where Medi-Cal beneficiaries live. In addition, Medi-Cal pays providers very little, even by Medicaid standards. The program reimburses doctors at 52% of Medicare rates; nationwide, the average Medicaid payment is 72% of Medicare rates, according to the California Health Care Foundation (CHCF).

Unsurprisingly, just 60% of California doctors accept new Medi-Cal patients; in contrast, 77% take new Medicare patients, and 85% take new patients covered by commercial insurance. In 2015, a study conducted by the CHCF found that 34% of primary care doctors had no Medi-Cal patients. Just 28% of doctors had as many Medi-Cal patients as the physicians whose loans are being repaid must have.

The large number of applications to CalHealthCares can be attributed to the heavy loan burdens that young doctors carry. Nearly half of US medical school graduates now leave residency with loans of $200,000 or more, according to a survey by Merritt Hawkins, a physician recruiting firm.

Other national and state loan repayment programs also encourage doctors to work in underserved areas. For example, the National Health Service Corps Loan Repayment Program offers up to $50,000 in repayments for primary care physicians who work for at least 2 years in a health professional shortage area. The Association of American Medical Colleges offers a database of state and federal loan repayment programs.

Considering that there are more than 60,000 practicing physicians in California, how much of a difference would it make to inject 247 physicians temporarily into areas with large Medicaid populations? More than you might think, Janice Coffman, PhD, MPP, a professor at the University of California, San Francisco, told the Sacramento Bee. The 5 years required by CalHealthCares, she said, is enough time for young doctors to make friends and put down roots in the community.

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