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QUESTION:
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Factors Underlying the Growth in Medicare | CBO Report titled Factors Underlying the Growth in Medicare's Spending on Physicians' Services --
Rising costs in Medicare, Medicaid, and other Federal health-related programs represent the CENTRAL long-term fiscal challenge facing the Nation.
The Congressional Budget Office (CBO) is therefore increasingly focusing on analyzing the causes of those rising costs and potential policy responses.
This background paper examines one RAPIDLY GROWING component of Medicare: spending for physicians' services under the Supplemental Medicare Insurance program, or Medicare Part B, on the basis of a fee schedule that specifies payment rates for each type of covered service.
Annual UPDATES to payment rates are governed by a mechanism known as the Sustainable Growth Rate, SGR, which aims to CONTROL Medicare's outlays for physicians' services.
The SRG formula operates by setting a TARGET amount for such expenditures and ADJUSTING payment rates to reflect differences between actual spending and spending targets (both of which are measured on an annual and a CUMULATIVE basis).
If actual spending under the SRG does NOT deviate from the expenditure targets, payment rates under the physician fee schedule are simply increased by the percentage change in the Medicare Economic Index, or MEI.
However, if actual spending is ABOVE the targets set by the SRG formula, the update to payment rates will be SMALLER than the increase in MEI.
If spending is BELOW the targets, the update will be HIGHER than the increase in the MEI.
Those adjustments are designed so that, over a period of years, cumulative spending will be BROUGHT INTO LINE with the cumulative spending target.
According to CBO estimates, if provisions of the current law remained unchanged, Medicare's payments to physicians would be REDUCED by 10 percent in 2008 and 5 percent annually over the following several years.
However, because lawmakers OVERRODE the SGR mechanism between 2003 and 2007 -- REPLACING negative updates with small positive or zero updates -- it is uncertain whether the SGR mechanism will be allowed to operate as specified.
Although updates to Medicare payment rates have fluctuated since the SGR was established, spending for physicians' services under the fee schedule has INCREASED steadily, rising by 79.2 percent between 1979 and 2005.
Even after adjusting for changes in the cost of providing physicians' services -- as measured by the Medicare Economic Index, MEI, -- and for growth in the number of beneficiaries enrolled in the program, spending on physicians' servies has INCREASED by 34.5 percent.
CBO's analysis finds that MUCH OF THE GROWTH in spending is the result of increases in the VOLUME AND INTENSITY of physicians' services rather than the changes in Medicare's payment rates.
On average, the physicians' WORK EXPENSE component, (which is a measure of the physicians' time and skill and the intensity of the service provide), accounts for 50 percent of a service's relative value.
The physicians' PRACTICE EXPENSE component, (which is a measure of average expenses related to the maintenance of a practice, such as office rents and employees' wages), accounts for about 45 percent.
Physicians' MALPRACTICE costs, which is a measure of malpractice insurance premiums, accounts for the remainder.
THE BOTTOM LINE: we can expect continued percentage DECREASES in Medicare payments for physicians' services in order to constrain, control cumulative escalating Medicare costs associated with an aging population and advances in medicine (longevity).
This in turn may result in physicians accepting patients who have private insurance as well as being covered by Medicare. |  | asked by grandpa24551, 6/8/2007 |
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Categories:
Aging, Procedures, Doctors, Medicare, Health and Health Care, Supplemental Medical Insurance, Health Insurance
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