Medicare Physician Payment, Participation, and Reform

Abstract

Prologue: National expenditures for physicians' services have been rising over the last twenty years at increasing rates, from 83 percent annually in the 1960-65 period to a 14.9 percent annual rate in 1980-82, despite a recession. Medicare program spending has reflected these trends. During the period 1978 to 1983, expenditures for physicians' services increased at an annual average rate of growth of 20.5 percent. Between 1983 and 1984, the rate of increase for Medicare Part B outlays fell to 11.4 percent. In this essay, the authors, all of whom work for the Health Care Financing Administration (HCFA), set out these physician spending trends, Medicares payment methods, existing problems with this system, and generic approaches to reform. The authors declare that “inefficiencies in the existing payment system, coupled with their impact on the federal budget deficit, make changes in Medicare a top priority for the administration and Congress.” The authors work for HCFA's Office of Legislation and Policy. Ira Burney is a senior policy analyst who is steeped in the details of the complicated world of Medicare physician payment. Hickman has spent four years working as a budget and legislative analyst at the agency. Paradise is a presidential management intern, and George Schieber, who holds a Ph.D. in economics from Syracuse University, is a recognized specialist in physician payment. Schieber formerly taught at the University of Pittsburgh and conducted research at The Urban Institute. For the last decade, Schieber has specialized in physician payment issues at the Department of Health and Human Services. During this period, the department has been plagued with the lack of a consistent national physician data base and a dearth of information on how physicians would respond to payment reform proposals. These problems still dog the department's policymakers. In January, Schieber took leave from HCFA for a time to conduct comparative international health policy studies at the Organization for Economic Cooperation and Development.