Physician Spending Research Articles

Regulation of pharmaceutical markets in Germany: improving efficiency and controlling expenditures?

Rising pharmaceutical expenditure has become a major concern for policy makers in Germany over recent years. Therefore, the pharmaceutical market has been increasingly targeted by different kinds of regulation, focussing on both the supply and the demand side, using price, volume and spending controls. Specific regulations include price reductions, reference pricing, pharmacy rebates for sickness funds, increasing co-payments, an 'autidem' substitution, parallel imports, a negative list, directives, and finally, spending caps for pharmaceutical expenditure per physicians' association. Although it is difficult to attribute certain effects to single measures, some measures like reference pricing and physician spending caps are more effective and long-lasting than others. In spite of being opposed by physicians, the spending caps applied between 1993 and 2001 have limited pharmaceutical expenditure for an entire decade. However, while some measures do effectively control expenditures, their effect on allocative efficiency may be detrimental.

Medicare beneficiaries and the impact of gaining prescription drug coverage on inpatient and physician spending.

To assess whether gaining prescription drug coverage produces cost offsets in Medicare spending on inpatient and physician services. Two-year panels constructed from 1995 to 2000 Medicare Current Beneficiary Survey, a dataset of Medicare claims and health care surveys from the Medicare population. We estimated a series of fixed-effects panel models to calculate adjusted changes in Medicare spending as drug coverage was acquired (Gainers) relative to the spending of beneficiaries who never had drug coverage (Nevers). Explanatory variables in the model include age, calendar year, income, and health status. Assessments of inpatient and physician services spending provided no evidence of overt selection behavior prior to the acquisition of drug coverage (i.e., there were no preswitch spikes in Medicare spending for Gainers). After enrollment, the medical spending of Gainers resembled those of beneficiaries who never had drug coverage. Overall, the multivariate models showed no systematic postenrollment changes in either inpatient or physician spending that could be attributed to the acquisition of drug coverage. We found no consistent evidence that drug coverage either increases or reduces spending for hospital and physician services. This does not necessarily mean that drug therapy does not substitute for or complement other medical treatments, but rather that neither effect predominates across the Medicare population as a whole.

APA Among Groups Asking for Medicare Payment Fix

Back to table of contents Next article Government NewsFull AccessAPA Among Groups Asking for Medicare Payment FixKate MulliganKate MulliganSearch for more papers by this authorPublished Online:7 Jun 2002https://doi.org/10.1176/pn.37.11.0001aAPA and other medical associations have challenged the legal basis for the refusal by the Centers for Medicare and Medicaid Services (CMS) to ameliorate the impact of a cut of 5.4 percent in the Medicare physician payment rate for 2002.At a press conference on May 13, the American Medical Association (AMA) released a legal analysis of issues related to the reimbursement formula conducted by Terry S. Coleman, J.D., former Health Care Financing Administration (HCFA) deputy administrator for the Bush administration and HCFA chief counsel for the Reagan administration. APA and 40 other specialty and health professional associations commissioned the analysis.Administration officials contend that they have no leeway to modify the cuts unless the reimbursement formula is changed by legislation. In announcing the cuts last December, CMS Administrator Tom Scully said, “The law designing the physician update is incredibly prescriptive. The formula locks us in.”APA and other medical associations supported a legislative fix to the cuts and other problems resulting from application of the formula proposed in the Medicare Physician Payment Fairness Act (HR 3351 and S 1707) late last year (Psychiatric News, December 7, 2001).The bill would limit the cut to .9 percent for 2002 and require the Medicare Payment Advisory Committee (MedPAC) to conduct a study of the formula. The legislation is sponsored by 331 representatives and 74 senators, but it has not reached the floor of either chamber for a vote.In his legal memorandum, Coleman argued that CMS has the authority to revise projection errors used in estimating the sustainable growth rates (SGR) in 1998 and 1999.The SGR is set each year by considering four factors: the percentage increase in fees for all physicians’ services, the percentage change in the number of Medicare Part B enrollees, the percentage growth in real gross domestic product per capita, and the percentage change in expenditures for physicians’ services.CMS miscalculated several factors in 1998 and 1999. For example, in 1999, the agency estimated that the number of Medicare Part B enrollees would fall 4.3 percent, but the number fell only 1.1 percent because enrollment in Medicare+Choice (the Medicare managed care option) was less than anticipated. The result of that faulty projection was that the formula failed to reflect the cost of providing care to a million Medicare beneficiaries through Medicare Part B.CMS also miscalculated growth in the gross domestic product in 1998 and 1999. The result was an underestimate of allowed expenditures that, in turn, will have a long-term impact on the physician payment rate, if the estimates are not corrected.The AMA estimates that these miscalculations have removed $20 billion from Medicare funding for physician services by artificially lowering spending targets.Coleman also claims that CMS improperly included drug costs in its calculation to determine the amount Medicare spends for physician services. Although most drugs are not funded through Medicare, certain physician-administered drugs are reimbursable. Spending on these drugs increased about $550 million a year from 1996.According to Coleman’s argument, by including the cost of these drugs, the cost of physician services was inflated artificially, which worked to drive down the payment rate. The AMA claims that if uncorrected, the projection errors and the inclusion of drug costs would slash reimbursement to health care professionals by an estimated $62 billion over the next 10 years.In a letter dated March 21, Rep. Bill Thomas (R-Calif.), chair of the House Ways and Means Committee, and Rep. Nancy Johnson (R-Conn.), chair of the Ways and Means Health Subcommittee, also argued that CMS has the authority to correct previous errors. They noted the additional problem of using productivity measures based on the performance of the economy as a whole to predict changes in productivity for physicians.Their letter concluded with the statement, “We believe that the cumulative effect of questionable assumptions and uncorrected errors greatly exacerbates the physician spending baseline. . . .”Jay Cutler, J.D., director of APA’s Division of Government Relations, said, “APA joins with the AMA and other medical associations in urging the administration to take immediate action to fix the update formula and remove the excessive and inappropriate Medicare cuts on rates paid physicians.”According to CMS, application of the current formula over the next five years would produce the following updates: -5.7 percent in 2003; -5.7 percent in 2004; -2.8 percent in 2005; and -0.1 percent in 2006.Information about the legal challenge is posted on the Web at www.ama-assn.org/ama/pub/article/1751-6222.html. ▪ ISSUES NewArchived

APA-Backed Bill Would Head Off Medicare Fee Cuts

Back to table of contents Next article Government NewsFull AccessAPA-Backed Bill Would Head Off Medicare Fee CutsKate MulliganKate MulliganSearch for more papers by this authorPublished Online:7 Dec 2001https://doi.org/10.1176/pn.36.23.0001To lend weight to a Senate bill that would protect physician Medicare reimbursement rates, APA has joined more than 40 other medical associations to support the Medicare Physician Payment Fairness Act (S 1660).The bill is sponsored by Sens. Jim Jeffords (I-Vt.) and John Breaux (D-La.). It was introduced in the House of Representatives last month.The impetus for the proposed legislation was the announcement on October 31 by the Centers for Medicare and Medicaid Services (CMS) that the factor used to update payment rates for individual medical services will go down by 4.8 percent next year, and the conversion factor will be even lower, at 5.4 percent below the 2001 level.Jay Cutler, J.D., APA’s government relations director, told Psychiatric News, “The negative payment update problem is particularly acute for psychiatrists, who must also contend with underlying limitations in the Medicare program on reimbursement for psychiatric services, such as Medicare’s discriminatory 50 percent copayment requirement. APA is joining the AMA and all of medicine in efforts to correct the problem this year.”In an interview, Edward Gordon, M.D., chair of the APA Medicare Advisory Committee, emphasized the harmful effect the decrease could have on patient care. “Already many psychiatrists are unwilling or unable to take Medicare patients under the current fee schedule,” he said. “In New York, for example, Medicare payment is one-third to one-half lower than the prevailing rate for psychiatrists. It is a particularly difficult time to decrease the availability of mental health services when the whole country is under stress.”In announcing the physician payment changes, CMS Administrator Tom Scully said, “The law designing the physician update is incredibly prescriptive.The formula locks us in.”Unless Congress acts to change the formula or delay its implementation, the cuts will take effect on January 1, 2002. In fact, although CMS and medical associations differ on whether the formula has been beneficial to physicians, both sides agree that the federal government currently has little latitude in terms of implementation.The intent of the complex formula that determines physician reimbursement for treating Medicare beneficiaries is to change payment rates annually to reflect changes in physician practice costs. But, in addition to costs, the formula must also consider a target: the sustainable growth rate (SGR).The target is based on four factors: gross domestic product (GDP), enrollment in the traditional Medicare program, input prices, and spending due to new laws or regulations.When actual spending in a given year is inconsistent with the previously established target, the next year’s update must be adjusted to bring spending in line. In 2001 revisions to previous year estimates of GDP, increases in physician spending, and the economic slowdown produced the average decrease of 5.4 percent in physician rates for 2002.Congress adopted the Medicare fee formula as part of the Balanced Budget Act of 1997. CMS claims that the formula worked well for physicians between 1998 and 2001. The cumulative increase was 15.9 percent, which CMS compares with a medical-cost inflation increase of 9.3 percent.In their letter supporting the new legislation, however, the medical association signatories charge, “[The 2002 decrease] would be the fourth broad-scale reduction in physicians’ and other practitioners’ fees since 1992 and would bring the average increase in Medicare fees between 1991 and 2002 down to just 1.1 percent a year, or 13 percent less than the government’s own estimate of practice cost inflation.”The November 19 issue of American Medical News reports, “In 1998, when the SGR was introduced, GDP growth for both the current and upcoming year was underestimated by 2 percent. That has lowered the spending target by billions of dollars, increasing the magnitude of the reduction.”That same issue also reports that nearly 30 percent of family physicians are not accepting new Medicare patients.The most immediate impact of the Medicare Physician Payment Fairness Act would be to trim the decrease in physicians’ rates from 5.4 percent to .9 percent in 2002. In addition, the bill also would require the Medicare Payment Advisory Commission to conduct a study on replacing the SGR as a factor in determining the update for physician payments with a factor that more accurately reflects changes in the costs of providing physicians’ services. The bill has been referred to the Senate Finance Committee, which has not yet acted on it.The final rule describing revisions to payment policies under the Medicare physician fee schedule for calendar year 2002 can be found at www.hcfa.gov/regs/pfs/. The text of the Medicare Physician Payment Fairness Act can be accessed on the Web at thomas.loc.gov by searching on “S 1660.” ▪ ISSUES NewArchived

New French health plan takes softer line on physician spending

New French health plan takes softer line on physician spending

Medicaid physician fee levels and children's access to care.

This study examines the effects of physician fees on children's use of preventive and illness-related ambulatory physician services under the Medicaid program. Using data from the 1987 National Medical Expenditure Survey (NMES), we examine the effects of Medicaid fee generosity on physician service use and overall ambulatory physician spending. The results indicate that more generous fees are associated with a greater likelihood of having a doctor's office as a usual source of care and a higher number of preventive visits at office-based sites of care. Having a doctor's office as a usual source of care is associated with lower overall ambulatory physician expenditures.

The Rising Price of Physicians' Services: A Correction and Extension on Supply

The effect of changing prices on the supply of physicians' services has important policy implications. In this note, a correction of previous work on supply by the author in this shows that with aggregate data the price elasticity of supply is zero. However, using individual physician data in the context of a utility-maximizing model of supply, it is found that the price elasticity of supply is about -0.2. This result could portend serious problems ahead for recently enacted Medicare pricing strategies to contain physician spending. Copyright 1994 by MIT Press.

Area variation in Medicare physician spending.

DataWatch Health AffairsVol. 11, No. 1 Area Variation In Medicare Physician SpendingJanet B. Mitchell AffiliationsThe Center for Health Economics Research in Waltham, MassachusettsPUBLISHED:Spring 1992No Accesshttps://doi.org/10.1377/hlthaff.11.1.224AboutSectionsView articleView Full TextView PDFPermissions ShareShare onFacebookTwitterLinked InRedditEmail ToolsAdd to favoritesDownload CitationsTrack CitationsPermissions View articleTOPICSCosts and spendingMedicare Part BMedicare eligibilityDiagnosis-related groupsSurgeryAccess to careMedicareMedicare Part ARelative value unitsCoronary artery bypass surgery Loading Comments... Please enable JavaScript to view the comments powered by Disqus. DetailsExhibitsReferencesRelated Article MetricsCitations: Crossref 5 History Published online 1 January 1992 InformationCopyright © by Project HOPE: The People-to-People Health Foundation, Inc.ACKNOWLEDGMENTSThis research was supported under Grant no. 17-C-98999/I from the Health Care Financing Administration (HCFA). The view and opinions in this DataWatch are the author's, and no endorsement by HCFA or the Department of Health and Human Services is intended or should be inferred. An earlier version of this work was presented at the Association for Health Services Research meetings in Chicago, Illinois, June 1989.PDF downloadCited ByReturns to Local-Area Health Care Spending: Evidence from Health Shocks to Patients Far From HomeAmerican Economic Journal: Applied Economics, Vol. 3, No. 3Use of Physicians' Services under Medicare's Resource-Based PaymentsNew England Journal of Medicine, Vol. 356, No. 18Geographic variation in expenditures for workers' compensation hospitalized claimsAmerican Journal of Industrial Medicine, Vol. 35, No. 2Geographic Variations in Physician Service Utilization18 August 2016 | Medical Care Research and Review, Vol. 52, No. 2Geographic Variation in Expenditures for Physicians' Services in the United StatesNew England Journal of Medicine, Vol. 328, No. 9

Has PPS Increased Medicare Expenditures on Physicians?

We use data from 1983 and 1985 on the volume of Medicare physician services to analyze whether Medicare's Prospective Payment System (PPS), which resulted in a significant decline in hospital spending, led to a partially offsetting increase in real expenditures for physician services. We also analyze the effect of increases in assignment rates, increasing incomes of the elderly, and other factors on real expenditures during this period. Our main conclusion is that PPS has at most a small positive effect on real physician expenditures. Because people spent less time in the hospital, Medicare physician spending declined; but because of incentives to shift radiology and other services out of the hospital, some of this decline was offset. We also conclude that the sharp increase in Medicare assignment rates over this period, along with the rising incomes of the elderly during this period, contributed to the observed growth.

Prospective payment to medical staffs: a proposal.

Prologue: The issue that troubles analysts more than any other when the prospect of a Medicare physician fee schedule is discussed is its likely inability to control increases in the volume and intensity of Part B services. Over the past decade, increases in volume and intensity of services have accounted for about half of the rise in Medicare payments to physicians per beneficiary. Price increases have accounted for the other half. In this paper; economist Pete Welch proposes to moderate the growth of Part B physician spending by paying doctors prospectively through hospital medical staffs. As he points out, such an approach would deal with the volume and intensity issue in an explicit fashion. Welch holds a doctorate in economics from the University of Colorado. He served on the faculty of the University of Pittsburgh for seven years (1977-1984), at which point he joined the staff of the President's Office of Management and Budget (OMB). While working in the OMB's budget review division, Welch devoted his attention to Medicare, Medicaid, the veterans' medical care program, and the Federal Employee Health Benefits Program. Welch joined the Urban Institute in 1987 as a senior research associate. At the institute, he has worked largely on projects funded by the Health Care Financing Administration, including capitation payment and development of a geographic price index that would lessen the wide variations in Medicare payments to physicians by relating payment to the cost of practice in the area.

The Medicare physician fee freeze: what really happened?

Prologue: Physicians and patients play the key roles in determining the volume of medical services provided by practitioners. Physicians, as agents of their patients, render professional judgments regarding the use of medical services. Professional norms call for the provision of all beneficial services, but physicians paid on a fee-for-service basis have a financial incentive to provide more service (in contrast to doctors paid on a capitated basis, who have a financial incentive to undertreat). As physician practice has come under more intense financial pressure, there is some evidence that physicians have responded to fee constraints by providing additional services. In this paper, Janet Mitchell and her coauthors track trends in Medicare physician spending during the program's recent (1984-1986) freeze on fees for services provided by doctors. By examining all Medicare claims submitted by doctors from four states and extrapolating the data to the experience in all states, the authors found that the pr...

Medicare Physician Payment, Participation, and Reform

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.