The Health Divide: Q&A — Why are doctors getting paid less to see patients of color?

Journalists have covered the many ways that racial injustices fuel health care disparities. We’ve looked at the impact of neighborhood segregation, discrimination and the violence of poverty. Now, a new national study has uncovered a hidden driver of this country’s glaring health disparities: the price that insurers pay for care.

Physicians receive lower payments for taking care of Black and Hispanic patients than white patients, according to the study by researchers at the Leonard Davis Institute of Health Economics at the University of Pennsylvania. On average, physicians are paid 9-10% less for outpatient visits with Black and Hispanic adults, even after accounting for the services provided, the doctor’s specialty, and where and what year the visit took place.

For children, the difference was even greater — 14-15%.

Doctors and clinics aren’t slapping lower prices on services for patients of color. The payment gap is driven largely by the fact that Black and Hispanic patients are more likely to have skimpy private health insurance or Medicaid, with its notoriously low reimbursement rates. 

But let’s be clear: Health care in this country is a business. And when the outrageously overpriced insurance market forces some patients into worse plans than others, inequality is not just the byproduct of large societal forces and flawed government policies; it’s embedded in the business model.

Things don’t have to be this way. The study found no difference in physician payments for patients covered by fee-for-service Medicare, which standardizes rates for any given service.

The research, published in late November in JAMA Health Forum, is the first comprehensive analysis of the link between the race or ethnicity of patients and the amount doctors get paid. The analysis included 152,336 outpatient visits.

“Health disparities are not just about who has insurance, who faces implicit or explicit bias, or who is disadvantaged by, say, neighborhood disadvantages that affect health,” said Dr. Aaron Schwartz, the study’s lead author and a senior fellow at the institute. “It is built into the prices the system pays for care.”

I asked Schwartz in the following interview why the payment gap is so problematic.

You and your colleagues make it clear this isn’t about individual doctors choosing whom to value, but about a system speaking through pricing. What is it saying to the health care sector?

Schwartz: Lower payments send weaker signals to invest in clinics where Black and Hispanic families live. Over time, that translates into fewer physicians, smaller staffs, longer waits, and lower availability of appointments — especially for children. And that means lower use of needed care, which shapes health outcomes for decades.

What surprised you about the findings?

Schwartz: First, I expected Medicaid to explain almost all of the differences. Medicaid does play a big role, but even after adjusting for whether a visit was paid by Medicaid, Medicare or private insurance, and for how generous the insurance plan was, we still saw a meaningful gap. That residual difference was larger than I anticipated. 

Second, the disparities were especially large in pediatrics. Seeing such a large gap in care for kids was striking and worrying, because pediatric care is such a foundational investment in long-term health.

How does private insurance contribute to the gap?

Schwartz: Black and Hispanic patients are more likely to be enrolled in private insurance plans that pay lower prices to physician practices than other private plans. Private plans negotiate fees with practices, and lower-fee plans are more common among people in lower-wage jobs or in communities of color.

It’s one thing to show a payment gap by race. It’s another thing to say that gap is a reason why patients of color encounter so many challenges getting the care they need. How did you get there?

Schwartz: Step one is the main task of our analysis. We measured how much less physician practices are paid when they see Black and Hispanic patients compared with white patients, after accounting for what happens during the visit. That gives us a payment gap.

Step two is measuring racial and ethnic gaps in outpatient health care use. The data that is the focus of our study has information about how often patients see the doctor for various issues. 

Step three combines this information with results from prior research to answer the question: If practices respond to higher or lower payments the way prior research suggests they do, how much difference in use of care could those payment gaps create? There is a fairly large literature showing that when payment rates go up, practices tend to deliver more health care, and when payment rates go down, they do less.

What did those steps lead you to conclude?

Schwartz: The size of the payment gap is large enough that, if practices behave the way past studies suggest, it could plausibly account for a meaningful share of the disparities we see in how often patients are able to see a doctor. In other words, the numbers line up in a way that makes payment a credible, quantitatively important driver — not just a side issue.

Would equalizing provider payments reduce health disparities?

Schwartz: Eliminating the pay difference would not erase all health disparities — there are many other drivers. But it would attack a very fundamental and underappreciated mechanism: the financial incentives that shape where clinicians practice, how much capacity they have, and whom they are eager to serve.

With massive Medicaid cuts, and skyrocketing premiums likely to push many people off Affordable Care Act plans, we probably won’t equalize payments to doctors anytime soon. What effect will these policy changes have?

Schwartz: While our study does not evaluate any specific forthcoming policy change, it suggests a clear principle: Policies that reduce what practices are paid to care for lower-income and publicly insured patients are likely to deepen racial and ethnic disparities.

What stories would you like to see journalists pursue along these lines?

Schwartz: Tying our paper to the current Medicaid cuts and the ACA exchange issues would be a good angle. Focusing on racial and ethnic disparities in pediatric health care access would also be useful. The gaps are dramatic. And the Wall Street Journal recently had a detailed story about challenges accessing health care for Medicaid beneficiaries. A story about how this burden is differentially felt across racial and ethnic lines would be helpful. 

What questions haven’t I asked?

Schwartz: A natural question is: Should payers, regulators, and large health care purchasers be required to audit and publicly report these payment disparities, the same way we report racial gaps in quality measures? Making the inequities in prices visible would be an important first step toward addressing them.