March 31,2005

Grassley: Increase in Medicare Physician Services Raises Questions

M E M O R A N D U M

To: Reporters and Editors
Re: Medicare physician fees, services
Da: Thursday, March 31, 2005

Today, the Centers for Medicare and Medicaid Services (CMS) released a letter to the Medicare Payment Advisory Commission (MedPAC) outlining the current estimates of the 2006 physician fee schedule update. CMS actuaries estimate that the 2006 physician fee schedule update will be negative 4.3 percent. Underlying this update is a substantial growth in spending for the Medicare services involved.

There are several areas that contributed to the increase in spending. There was an increasein office visits, with a shift toward longer and more intensive visits. There were more minorprocedures provided, such as therapy procedures performed by physicians and physical therapists.Beneficiaries also received more frequent and more complex imaging, such as MRI scans andechocardiograms. There have been more laboratory tests and more utilization of prescription drugsin doctors’ offices. These areas indicate that the major contributors to increased spending areassociated with certain diagnostic and therapeutic services, including services involving thetreatment of chronic conditions.

Sen. Chuck Grassley, chairman of the Committee on Finance, today made the followingcomment on the agency letter to MedPAC.

“The data presented illustrate a significant increase in Medicare expenditures for physicianservices. The Administration and Congress should take a closer look at what’s causing the increasein Medicare Part B expenditures because that leads to an increase in beneficiary Part B premiums.It’ll be important to understand which services contribute to health improvements and which aremore questionable. To that end, physicians and other interested parties should be included in thesediscussions.

“Congress included a positive 1.5 percent increase for physicians for 2004 and 2005 in theMedicare Modernization Act of 2003. Yet, these updates as well as the increase in Part Bexpenditures resulted in a significant increase in the Part B premium for beneficiaries in 2005, withanother estimated increase in 2006.

“To address the increase in Medicare spending by both government and beneficiaries, I wantto work toward a system that recognizes efficient, quality care. The move toward a value-basedpurchasing system will increase the quality of care and avoid unnecessary costs to the Medicareprogram.

“It doesn’t help the situation when Congress addresses the issue of negative updates eachyear. We need to find a physician payment system that works. Until then, it’ll be increasinglydifficult to find the resources needed for a long-term fix, if spending related to the physician feeschedule continues to increase.”

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