Factors affecting differences in Medicare reimbursements for physicians' services.

Under Medicare's Part B program, wide variations are found in average reimbursements for physicians' services by demographic and geographic characteristics of the beneficiaries. Average reimbursements per beneficiary enrolled in the program depend upon the percentage of enrolled persons who exceed the deductible and receive reimbursements, the average allowed charge per service, and the number of services used. This study analyzes differences in average reimbursements per beneficiary for physicians' services in 1975 and discusses allowed charges and use factors that affect average reimbursements. Differences in the level of allowed charges and their impact on meeting the annual deductible are also discussed. The study indicates that average reimbursements per beneficiary are likely to continue to vary significantly year after year under the present Part B cost-sharing and reimbursement mechanisms.     

Volume and intensity of Medicare physicians' services: an overview

From 1978 to 1987, Medicare spending for physicians' services increased at annual compound rates of 16 percent, far exceeding increases expected based on inflation and increases in beneficiaries. As a result, Medicare spending for Part B physicians' services has attracted considerable attention. This article contains an overview of expenditure trends for Part B physicians' services, a summary of recent research findings on issues related to volume and intensity of physicians' services, and a discussion of options for controlling volume and intensity. The possible impact of the recently enacted relative-value-based free schedule on volume and intensity of services is discussed briefly.     

Medicare fees for physician services are resource-based

Beginning January 1, 1992, Medicare has relied on a resource-based relative value scale (RBRVS) to establish physician fees. Medicare pays 80 percent of the lower of the amount a physician bills for the service or the fee schedule amount. The patient is responsible for the remaining 20 percent, as well as the annual Part B deductible of $100, plus any additional amount the physician may be allowed to bill. Rarely is the billed amount below Medicare's fee schedule amount. Adoption of the RBRVS fee schedule severed the link between the amount a physician charged for a service and the amount Medicare paid for it. RBRVS implementation required significant changes in the coding system used to document and bill physician services, particularly medical visits and consultations.     

Options for change under Medicare: impact of a cap on catastrophic illness expense.

This study analyzes the total deductibles and coinsurance Medicare beneficiaries accrued in 1980. The study shows that Part B services accounted for 70 percent of all liability and Part A for 30 percent. Only 21 percent of enrollees exceeded $270 in liability from Part A and Part B combined. In 1980, if every enrollee had paid a surcharge of about $70, all liability over $270 could have been capped--without any additional program outlays. Similarly, projections for 1984 indicate that a surcharge of $98 could cap all liability over $800. For Part B alone, a surcharge of $113 could cover all liability over $200.     

Shortcomings in Medicare bonus payments for physicians in underserved areas

This study examines trends in Medicare spending for basic payments and bonus payments for physician services provided to beneficiaries residing in nonmetropolitan counties. For our analysis, we used Medicare Part B physician/supplier claims data for 1992, 1994, 1996, and 1998. Payments under the congressionally mandated bonus payment program acccounted for less than 1 percent of expenditures for physician services in nonmetropolitan, underserved counties. Physician payments increased from 1992 to 1998, while bonus payments increased through 1996 but then declined by 13 percent by 1998. The share of bonus payments to primary care physicians declined throughout the decade, but the share for primary care services increased.     

Impact of Critical Access Hospital Conversion on Beneficiary Liability

ABSTRACT: Context: While the Medicare Critical Access Hospital (CAH) program has improved the financial viability of small rural hospitals and enhanced access to care in rural communities, the program puts beneficiaries at risk for paying a larger share of the cost of services covered under the Medicare part B benefit. Purpose: This paper examines the impact of hospital conversion to CAH status on beneficiary out‐of‐pocket coinsurance payments for hospital outpatient services. Methods: The study is based on a retrospective observational design using administrative data from Medicare hospital cost reports and fee‐for‐service beneficiary claims from 1999 to 2003. The study compares changes in beneficiary co‐payments before versus after CAH conversion with payment trends among small rural non‐converting hospitals over the same period. Findings: Conversion to CAH status is associated with an increase in beneficiary coinsurance payments per outpatient visit of $17.19, equivalent to 34% of the sample average. However, CAH designation had no significant effect on the share of outpatient costs paid by the beneficiary. Most of the increase in beneficiary liability associated with conversion is attributable to the provision of more services per outpatient visit. Conclusions: While this and other studies show that conversion to CAH status results in more intensive outpatient care, CAH conversion does not appear to inadvertently create financial barriers to accessing ambulatory services in remote rural communities by forcing beneficiaries to pay a higher share of their Medicare part B costs.     

Despite 'welcome to medicare' benefit, one in eight enrollees delay first use of part B services for at least two years

Much research has focused on the possible overuse of health care services within Medicare, but there is also substantial evidence of underuse. In recent years, Congress has added a "welcome to Medicare" physician visit and a number of preventive services with no cost sharing to the Medicare benefit package to encourage early and appropriate use of services. We examined national longitudinal data on first claims for Part B services-the portion of Medicare that covers physician visits-to learn how people used these benefits. We found that 12 percent of people, or about one in eight, who enrolled in Medicare at age sixty-five waited more than two years before making their first use of care covered by Part B. In part, this delay reflected patterns of use before enrollment, in that people who sought preventive care before turning sixty-five continued to do so after enrolling in Medicare. Enrollees with Medigap coverage, higher household wealth, and a higher level of education typically received care under Part B sooner than others, whereas having greater tolerance for risk was more likely to lead enrollees to delay use of Part B services. Men had a lower probability of using Part B services early than women; blacks and members of other minority groups were less likely to use services early than whites. Although the "welcome to Medicare" checkup does not appear to have had a positive effect on use of services soon after enrollment, the percentage of beneficiaries receiving Part B services in the first two years after enrollment has steadily increased over time. Whether or not delays in receipt of care should be a considerable public policy concern may depend on what factors are leading specific categories of enrollees to delay care and how such delays affect health.     

Trends in physician assignment rates for Medicare services, 1968-85.

This article provides an overview of trends in Medicare assignment rates. It covers changes over time in assignment by demographic characteristics and State and analyzes beneficiary liability. Although assignment rates were rising slowly from 1977 to 1983, beneficiary liability was also rising, primarily because of the rise in physician charges and the reduction on allowed charges. Substantial increases in the assignment rate have coincided with the implementation of provisions in the Deficit Reduction Act of 1984 to encourage assignment, and the assignment rate reached on all time high of 69 percent in 1985.     

More Comprehensive Care Among Family Physicians is Associated with Lower Costs and Fewer Hospitalizations

PURPOSEComprehensiveness is lauded as 1 of the 5 core virtues of primary care, but its relationship with outcomes is unclear. We measured associations between variations in comprehensiveness of practice among family physicians and healthcare utilization and costs for their Medicare beneficiaries.METHODSWe merged data from 2011 Medicare Part A and B claims files for a complex random sample of family physicians engaged in direct patient care, including 100% of their claimed care of Medicare beneficiaries, with data reported by the same physicians during their participation in Maintenance of Certification for Family Physicians (MC-FP) between the years 2007 and 2011. We created a measure of comprehensiveness from mandatory self-reported survey items as part of MC-FP examination registration. We compared this measure to another derived from Medicare’s Berenson-Eggers Type of Service (BETOS) codes. We then examined the association between the 2 measures of comprehensiveness and hospitalizations, Part B payments, and combined Part A and B payments.RESULTSOur full family physician sample consists of 3,652 physicians providing the plurality of care to 555,165 Medicare beneficiaries. Of these, 1,133 recertified between 2007 and 2011 and cared for 185,044 beneficiaries. There was a modest correlation (0.30) between the BETOS and self-reported comprehensiveness measures. After adjusting for beneficiary and physician characteristics, increasing comprehensiveness was associated with lower total Medicare Part A and B costs and Part B costs alone, but not with hospitalizations; the association with spending was stronger for the BETOS measure than for the self-reported measure; higher BETOS scores significantly reduced the likelihood of a hospitalization.CONCLUSIONSIncreasing family physician comprehensiveness of care, especially as measured by claims measures, is associated with decreasing Medicare costs and hospitalizations. Payment and practice policies that enhance primary care comprehensiveness may help “bend the cost curve.”     

Medicare physicians' services: the composition of spending and assignment rates.

Medicare spending for physicians' services, the second largest component of the Medicare program (24.5 percent), represents 1.3 percent of the Federal budget, 0.41 percent of the gross national product, and 19.4 percent of national spending for physicians' services. Interest in reforming the Medicare physician payment system is growing. Detailed information on patterns of Medicare spending for physicians' services and assignment rates according to physician specialty, place of service, type of service, and procedure are presented here.     

Time trends in inpatient physician spending.

OBJECTIVE. Despite falling admissions and declining lengths of stay, Medicare expenditures for inpatient physician services have continued to climb; this article seeks to understand this trend by examining the expenditures on a per admission basis. DATA SOURCES AND STUDY SETTING. One hundred percent Medicare claims data were available from nine states for the 1985-1988 time period. STUDY DESIGN. Because Medicare's prospective payment system encourages hospitals to shift some services outside the inpatient setting, we examined trends in episodes of care, encompassing some time both before and after the inpatient stay itself. Trends were also examined at the individual DRG level in order to partially control for case-mix shifts and increased surgical use. Allowed charges were purged of both Medicare fee updates and geographic price variation in order to derive estimates of real spending growth. DATA COLLECTION/EXTRACTION METHODS. Hospital and physician claims were merged to form inpatient episodes that included seven days prior to admission as well as 30 days following discharge. PRINCIPAL FINDINGS. Physician spending per episode increased 27 percent just over this four-year time period, but with considerable variation by DRG ranging from only 2 percent for transurethral prostatectomies (TURPs) to 56 percent for uncomplicated acute myocardial infarctions (AMIs). Changes in case severity and hospital and physician characteristics were all found to be important contributors to the increase in physician inpatient spending. Most important seemed to be the growth in the number of physicians associated with the inpatient stay (and the subsequent increase in diagnostic tests and other procedures). CONCLUSIONS. The findings suggest that control of technology and control of the number of physicians involved in the care of a patient are both critical to constraining the rate of increase in physician inpatient expenditures.     

Geographic variation in relative fees under Medicare.

Little is known about geographic variation in Medicare's relative fee structure. Using 1986 Part B Medicare claims data, ratios among physician fees for surgical procedures belonging to small families of closely related procedures, excluding outliers, were found to vary up to twofold. Under Medicare's current system of physician payment, physicians in different areas face different financial incentives for performing one procedure in preference to possible alternatives. Changes in incentives under a resource-based Medicare fee schedule will be more pervasive than previously recognized.     

Do HMOs reduce health care costs? A multivariate analysis of two Medicare HMO demonstration projects.

Charge data from two Medicare HMO demonstration projects were analyzed to determine if prepaid plans achieved cost savings for enrolled beneficiaries. Fallon Community Health Plan of Massachusetts did not reduce total charges significantly for survivors in their first year postenrollment. However, the plan enjoyed reductions in total charges per month after the first year of nearly 38 percent (41 percent for Part A; 31 percent for Part B). Savings for decedents were more modest, reducing total charges per month by around 27 percent (19 percent, Part A; 68 percent, Part B). Greater Marshfield Community Health Plan of Wisconsin was not successful in controlling charges during the demonstration period. Marshfield incurred losses in the first postenrollment year for survivors due to a 38 percent increase in total charges per month (18 percent, Part A; 73 percent, Part B). In the second year postenrollment, the Marshfield plan was able to reduce losses for survivors to roughly 11 percent (-6 percent, Part A; 44 percent, Part B). For decedents, Marshfield experienced an increase in total charges per month of approximately 21 percent relative to fee-for-service comparisons, with Part B charges again much higher than those of the comparison group (47 percent).     

Medicare's fee schedule for hospital outpatient care

Medicare's hospital outpatient prospective payment system (OPPS) went live on August 1, 2000, after a decade of developmental work. The new system introduced a fee schedule that replaced the cost-related methods that Medicare previously used to reimburse various hospital outpatient services. Hospitals are now paid predetermined rates or fees based on the Ambulatory Patient Classification (APC) groups assigned to the services that Medicare patients receive during outpatient encounters. The new system aims to simplify Medicare's intricate cost-based reimbursement policies, improve hospital efficiency, ensure that payments are sufficient to compensate hospitals for reasonable Medicare costs, and reduce Medicare coinsurance amounts for beneficiaries. Implementation of OPPS-related administrative and operational changes has been a major challenge for hospitals.     

Trends in Medicare Part B mental health utilization and expenditures: 1987-92

This article examines the impact of expanding Medicare Part B coverage of mental health services, based on analysis of 6 years of Medicare Part B claims data (1987-92). Inflation-adjusted per capita spending more than doubled (from $9.91 to $21.63) following the elimination of the annual outpatient treatment limit and extension of direct reimbursement to clinical psychologists and social workers. There was a 73-percent increase in the user rate (from 23.25 to 40.20 per 1,000 Medicare beneficiaries), and a 27-percent increase in the average number of services per user (from 8.9 to 11.3). Mental health spending increased from 1 percent to 2 percent of expenditures for Part B professional services. Ongoing monitoring of mental health utilization is desirable to ensure that recent access gains are not eroded with the increasing shift to managed care and implementation of gatekeeper mechanisms.     

Agreement between physicians' office records and Medicare Part B claims data

This article tests agreement between demographic, diagnostic, and procedural information from primary-care physicians' office records and Medicare Part B claims for Maryland Medicare beneficiaries. The extent of agreement depended on the category of information being compared. Demographics matched poorly, probably due to incomplete record samples. Important diagnoses were often missing from the medical record. When claims indicated presence of disease, the patient was likely to have the disease, but claims did not capture all people who have the disease. Additionally, many laboratory tests and procedures were missing from the primary-care record. The appropriate use of either of these data sources depends on the specific research question that is being asked.     

Copayments and consumer search: increasing competition in Medicare and other insured medical markets.

Between 1950 and 1980, the physician fee component of the Consumer Price Index (CPI) rose 488 percent. In contrast, an index of physician fees adjusted for 1) overall inflation, and 2) the declining proportion which is paid out-of-pocket by the patient, declined over the same 30-year period. This last observation, pointing to the erosion of the market, is important for structuring price competition for physician services. For insured patients, out-of-pocket payments arise from deductibles, coinsurance and limits, each of which is briefly discussed in this article. Following a review of Medicare Part B physician reimbursement, the paper shows that limits can be used to strengthen the incentive which insured patients have to search for less expensive medical care.     

Preventive services for the elderly: would coverage affect utilization and costs under Medicare?

OBJECTIVES. This study was undertaken to determine whether adding a benefit for preventive services to older Medicare beneficiaries would affect utilization and costs under Medicare. METHODS. The demonstration used an experimental design, enrolling 4195 older, community-dwelling Medicare recipients. Medicare claims data for the 2 years in which the preventive visits occurred were compared for the intervention (n = 2105) and control (n = 2090) groups. Monthly allowable charges for Part A and Part B services and number of hospital discharges and ambulatory visits were compared. RESULTS. There were no significant differences in the charges between the groups owing to the intervention, although total charges were somewhat lower for the intervention group even when the cost of the intervention was included. Charges for both groups rose significantly as would be expected for an aging population. A companion paper describes a modest health benefit. CONCLUSIONS. There appears to be a modest health benefit with no negative cost impact. This finding gives an early quantitative basis for the discussion of whether to extend Medicare benefits to include a general preventive visit from a primary care clinician.     

Supply and demand factors in the determination of Medicare expenditures.

This article presents multivariate estimates of the effects of supply-side factors (e.g., provider reimbursement) and demand-side factors (e.g., beneficiary ability to pay) on state-level expenditures per enrollee in Medicare Part A and Part B. The results indicate that a 1 percent increase in elderly income significantly increases the propensity to use Medicare Part B services, resulting in a 0.45 percent increase in Part B expenditures per enrollee. By contrast, patients' ability to pay has a much weaker effect on Part A expenditures. Changes in provider reimbursement also exert a substantial effect on expenditures. A 1 percent rise in the Medicare Prevailing Charge Index raises Medicare Part B expenditures by 0.43 percent. Collectively, the findings of this study suggest that both limits on Medicare reimbursement to providers and increased beneficiary liability have substantial effects on Medicare costs. Whatever the merits of arguments for or against such controls, the responsiveness of Medicare expenditures to equal percentage changes in supply and demand factors appears to be of a similar order of magnitude.     

Physician response to a change in Medicaid fees.

This study examines the effects of a change in Medicaid fees on the volume of physician services provided to beneficiaries. The data set includes price and volume at the procedure-level for Medicaid physician services in Texas in 1991, 1993, and 1995. The empirical analysis compares the volume of services provided to Medicaid participants before and after a 1992 change in reimbursement method. The results indicate that, over the period 1991 to 1993, the change in Texas Medicaid physician fees did not have a statistically significant effect on the volume of services provided. When measured over a longer period of time (1991-1995), however, volume increased significantly when price decreased, but, when price increased, there was no significant effect on volume. The results thus provide empirical support for the behavioural offset assumption underlying the switch to Medicare's Resource-Based Relative Value Scale (RBRVS) method of physician payment. A key policy implication is that reduced fees did not lead to a lower volume of physician services provided to Medicaid patients at least over the period of analysis. However, the new Medicaid fee schedule did not have the desired effect of controlling Medicaid expenditures on physician services.