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. 1979 Summer;1(1):62-78.

Medicare and Medicaid physician payment incentives

I L Burney, G J Schieber, M O Blaxall, J R Gabel

Medicare and Medicaid physician payment incentives

I L Burney et al. Health Care Financ Rev. 1979 Summer.

Abstract

The incentives in the Medicare and Medicaid physician payment systems and their effects on six interrelated aspects of health care costs and beneficiary access to care were analyzed. Research results and data presented indicate that Medicare and Medicaid physician payment incentives are inconsistent with current public policy goals of (1) containing inflation in fees and expenditures, (2) encouraging physician participation in public programs, (3) improving the geographic and specialty distributions of physicians, (4) encouraging primary care instead of surgery, and also outpatient rather than inpatient treatment.

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References

    1. See Redisch MA. Physician Involvement in Hospital Decision Making. In: Zubkoff M, Raskin I, Hanft R, editors. Hospital Cost Containment: Selected Notes for Future Policy. New York: 1978. Gabel JR, Redisch MA. Alternative Physician Payment Methods: Incentives, Efficiency, and National Health Insurance. Milbank Memorial Fund Quarterly/Health and Society. 1979 Winter;57:1.

    1. Medicare establishes technical definitions of customary and prevailing charges. The customary charge for a given procedure in the current fiscal year is the physician' s median billed charge for that procedure during the previous calendar year. The prevailing charge is the 75th percentile of the distribution of all physicians' customary charges in the local area weighted by the number of times each physician billed for that specific procedure.

    1. See Sloan F, Steinwald B. The Role of Health Insurance in the Physician Services Market. Inquiry. 1975 Dec;10:4.United States Department of Health, Education, and Welfare, Social Security Administration. A Report on the Results of the Study of Methods of Reimbursement of Physicians' Services Under Medicare. Washington, D.C.: Jul, 1973. SS Publication No. 92-73, (10-73)Holahan J. Physician Availability, Medical Care Reimbursement, and Delivery of Physician Services: Some Evidence From the Medicaid Program. Journal of Human Resources. 1975 Fall;X:3.Dyckman Z. Council on Wage and Price Stability. A Study of Physicians' Fees. Washington: 1978. Holahan J, Hadley J, Scanlon W, Lee R, Bluck J. Paying for Physician Services Under Medicare and Medicaid. Milbank Memorial Fund Quarterly Health and Society. 1979 Spring;57:2.

    1. As discussed below, this potential has been mitigated to a certain extent by the application of an Economic Index that limits the annual rate of increase in Medicare and Medicaid prevailing charges.

    1. For example, these situations have been observed in certain provinces in Canada following the establishment of negotiated fee schedules for the National Health Insurance program. Although the composite Canadian physician fee index increased only 3.7 percent per year between 1969 and 1971, physicians' net incomes increased by 27.0 percent and per capita expenditures by 33.5 percent per year during that period. While some of this increase is due to payment for services that previously were written off as bad debts, Lewin and Associates. Government Controls on the Health Care Systems: The Canadian Experience. Washington, D.C.: Jan, 1976. HEW-OS-74-177. observed that there is a growing feeling that “many Canadian physicians have been increasingly manipulating the services they provide in light of the nature of the fee schedule in order to achieve their income goals.”

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