Government

Medical trends behind jump in Medicare physician spending

Treatment innovations and coverage expansions played a large role in the increase.

By David Glendinning — Posted July 2, 2007

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

Physicians' reaction to declining reimbursements, for the most part, was not to blame for recent increases in the volume of Medicare services that helped drive up the amount the program pays per senior, according to a new government report.

The Congressional Budget Office found that Medicare spending on physician services jumped by more than a third between 1997 and 2005, even after accounting for growth in the number of program enrollees and the increased cost to doctors of providing care. Over this period, Medicare's payment rates for services declined when adjusted for inflation. This means the spending hike resulted from a boost in volume and intensity of physician services, not an increase in the amount doctors received for each service, the CBO states.

To some extent, doctors dialed up their volume and intensity to make up for the income loss, the report said. But the CBO investigation found that this "behavioral response" played a minor role in the equation, accounting for only 1.4 percentage points of the total 34.5% increase in per-beneficiary spending over the eight years.

The portion of the volume and intensity boost not attributable to behavioral response resulted from Medicare trends that did not involve inherently financial considerations. Medicare coverage expansions, beneficiary population changes, evolution of disease patterns and medical innovations were among the factors that caused the bulk of the increase.

Physicians were gratified that the report acknowledged these factors as much more powerful spending drivers than physicians' responses to reimbursement levels, said outgoing American Medical Association Board of Trustees Chair Cecil B. Wilson, MD. The AMA says doctors base the level of their services on what is best for patients amid ever-changing clinical needs and medical advances.

Some experts warned, however, that physicians are overusing many technologies by administering them to patients who don't need them or who would be better served with different treatments.

"When people think about the cost problems in health care, they often equate it to rising prices, but it's important to remember that spending in health care is prices times quantities," said former Centers for Medicare & Medicaid Services Administrator Mark McClellan, MD, PhD. Medicare should make a transition to a program that pays more based on quality and necessity than on sheer volume and intensity, he said.

Because Congress relies on the CBO for its official cost estimates, the report could help organized medicine's push for physician payment reform. The AMA and many other physician organizations are calling on lawmakers to abandon the sustainable growth rate formula

"The report illustrates the complex factors that drive demand for physician services and shows that blunt instruments like the SGR will only exacerbate the problem," Dr. Wilson said. Many physicians have said they will be forced to start withdrawing from Medicare if planned annual reductions start taking effect next year.

The CBO also predicts potential problems under this payment-cut scenario. Although reimbursement didn't keep up with physicians' practice costs in the years after 1997, that trend did not directly cause many physicians to boost their volume to make up for the loss. But that could change if payment starts declining more steeply, the agency said.

In previous reports, the CBO has told Congress that it would cost more than $200 billion over a decade to completely repeal the SGR and base physician reimbursements solely on the costs of providing care.

Back to top


ADDITIONAL INFORMATION

Cost issues

Several factors played a role in the jump in Medicare spending per beneficiary between 1997 and 2005.

Overall Medicare payments -4.9%
Behavioral response to payment 1.4%
Treatment trends 38.8%
Other factors -0.7%
Total 34.5%

Note: Numbers are rounded.

Source: Congressional Budget Office

Back to top


External links

"Factors Underlying the Growth in Medicare's Spending for Physicians' Services," Congressional Budget Office, June, in pdf (link)

Back to top


ADVERTISEMENT

ADVERTISE HERE


Featured
Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story


Read story

Goodbye

American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story


Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story


Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story


Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story


Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story


Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story


Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn