Avik Roy writes:

In many cases, Medicaid pays doctors less than it costs to care for Medicaid patients, meaning that doctors face the choice of caring for the poor, and going broke, or shutting their doors to Medicaid patients.

So the answer might have to do with the regulatory system, but right off how can this be a market outcome?

Is the suggestion here that the fixed costs associated with running an office are so high that the breakeven point is achieved from a maximum throughput of full insurance patients?

And, further that there is simply no way of operating an office with lower overhead?

I can see how its not profit maximizing to accept Medicaid patients. I can even see how in a perfectly competitive market providers would have bifurcate into Medicaid and non-Medicaid providers.

However, I do not see why the market cannot find a way to provide paying customers with some level of service.