Press Release

Embargoed Until Contact

May 07, 2012

Sue Ducat
Director of Communications
(301) 841-9962


Issues In Medicare Spending Are A Focus Of May 2012 Issue Of Health Affairs

In Setting Doctors' Medicare Fees, CMS Usually Accepts The Recommendations of The AMA's Relative Value Update Panel--But Agency Decisions Don't Explain The Gap In Income For Primary Care Physicians


Bethesda, MD -- To calculate physicians' fees under Medicare--which in turn influence private payers' decisions on how they will pay doctors--the Centers for Medicare and Medicaid Services (CMS) relies on the recommendations of a controversial advisory panel known as the RUC (the Relative Value Update Committee), which mainly represents a broad group of national physicians' organizations. In recent years physicians in primary care have expressed concerns that this committee has too little representation from their ranks and is partly responsible for increasing the pay gap between primary care providers and specialists. Other research has shown that increases in physician service prices brought about by committee recommendations contribute to increased costs of services used by Medicare enrollees.


In the May issue of Health Affairs, a study by Miriam J. Laugesen, of Columbia University's Mailman School of Public Health, and colleagues examines these issues. The study analyzed CMS's decisions between 1994 and 2010 and found that CMS agreed with 87.4 percent of the committee's recommendations on how much physician time and effort is associated with various physicians' services. However, the study also found that CMS's decisions are less likely to lower fees for evaluation and management services, which account for a large percentage of primary care providers' income, than for work values of medical specialists.

"This is encouraging for providers in primary care and other specialties that bill the greatest proportion of these services," said the authors. "However, it does not explain why there has been no reduction in the income gap between primary care providers and specialists."


If policy makers or physicians want to change the update process but keep the Medicare fee schedule in its current form, the authors suggest that Congress and CMS make some long-term investments in the agency's ability to undertake research and analysis of issues such as how the effort and time associated with different physician services is determined.

The new issue of Health Affairs also includes several articles focusing on variations in Medicare and Medicaid spending, as follows:


Variations in Medicare and Medicaid Spending


Richard Kronick, HHS's deputy assistant secretary for health policy, and Todd P. Gilmer, of the University of California, San Diego, analyzed 2001-04 data from the CMS State Health Expenditure Accounts and found almost no relationship between the level of spending for Medicare and Medicaid at the state level. Using Medicare and Medicaid claims data, they did, however, find a strong correlation between the spending for these two programs within so-called Hospital Referral Regions--in effect, regional health care markets for tertiary medical care. According to the authors, these results suggest that the level of both Medicare and Medicaid spending within the regions is influenced by such factors as the local supply of hospital beds, the numbers of specialists, and the availability of other health care resources. The lack of correlation at the state level, however, suggests that other factors, such as overall state income, strongly influence utilization.

Distorted Spending Patterns on the "Dual Eligibles"


Nine million people in the United States, many of them elderly or younger disabled individuals, receive both Medicare and Medicaid benefits and are known as "dual eligibles." Thomas Bubolz, of the Dartmouth Institute for Health Policy and Clinical Practices, and colleagues examined state-level data and found a nearly threefold difference in per-person Medicare and Medicaid spending around the country on dual eligibles younger than sixty-five. Per-person spending, adjusted for differences in health care prices, ranged from $16,309 in Georgia to $43,587 in New York. The authors say such large variations among people with serious diseases or disabilities could expose some patients to unnecessary risk and drive costs up unnecessarily in other places. They also found evidence that states may be shifting costs of the dual eligibles from Medicaid to Medicare, presumably by moving them from nursing homes to hospitals. The issues highlight the large potential gains that could be realized if the care for dual eligibles were better coordinated.

Home Health Care and Durable Medical Equipment Spending Are Major Drivers of Medicare Variations


Most analyses of geographic variation in Medicare spending have focused on total spending, but James D. Reschovsky, of the Center for Studying Health System Change, and colleagues looked 'under the hood' at differences in spending across categories of medical services, such as diagnostic tests and durable equipment. In sixty communities nationwide, they found considerable variation. Even among local communities with high or low total health care use, very different combinations of services were used in the provision of health care. Two categories whose variation contributed most to differences in overall spending among these communities were home health and durable medical equipment, which the authors posit could be linked to fraud and abuse. They conclude that these areas may be targets for policy interventions directed at increasing efficiency.

About Health Affairs

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically and health policy briefs published twice monthly at Read daily perspectives on Health Affairs Blog. Download weekly Narrative Matters podcasts on iTunes.