It will force doctors to accept less in payment for their services. The market will react in kind. As Reason’s J.D. Tuccille explains:

The Obama administration’s argument for reducing reimbursements for providers who see Medicaid patients was made very succinctly in a California courtroom:

“There is no general mandate under Medicaid to reimburse providers for all or substantially all of their costs.”

The administration makes its argument in a case challenging California’s decision to reduce Medicaid reimbursements by 10 percent. Note that if you don’t reimburse sellers of goods and services for “all or substantially all of their costs” you are presumptively asking them to lose money on the deal. Unsurprisingly to everybody except government officials, providers tend to stop providing under such circumstances, if only to avoid bankruptcy, or else because they’re going through it.

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