Administration Studies Ways to Control Medicare Spending for Doctors’ Services

The Reagan Administration is considering far-reaching proposals to control spending for doctors’ services under the Medicare program, such as a fixed fee for each medical procedure or a flat monthly payment for every patient.

A study of cost-control measures probably will be completed later this year, but the Department of Health and Human Services has not decided on endorsing a particular approach, a department spokesman said Friday.

Reforms are being sought by Congress, which is concerned with rapidly rising federal outlays for Medicare at a time of burgeoning deficits, and by consumer groups, which are disturbed by the increase in out-of-pocket costs for 27 million participants in the health care program for citizens over 65.

Fee Schedule

Rep. Fortney H. (Pete) Stark Jr. (D-Oakland) said Friday that he will offer legislation providing “some kind of a fee schedule.” Hospitals treating Medicare patients now receive fixed fees for various procedures. “Why shouldn’t doctors (work under the same system)?” asked Stark, chairman of the health subcommittee of the House Ways and Means Committee.

“Once the American Medical Assn. realizes they are a union, they will come in and negotiate like one,” helping Congress devise a system of fees to keep costs under control, Stark said in a telephone interview from Hayward, Calif.

The AMA traditionally has been opposed to a government-mandated fee system, arguing that it would interfere with the quality of care. The organization declined to comment Friday on the possible proposals that may be contained in the Health and Human Services report.

Prices Vary Dramatically

The current complex Medicare system allows prices for physicians’ services to vary dramatically among doctors and geographic areas--an initial office visit typically costs $40 in California compared to $15 in Pennsylvania. There are 6,000 separate classifications for billing, with the amount reimbursed by Medicare linked to the doctor’s own customary charges as well as to the prevailing rate in the local region.

Medicare theoretically pays 80% of covered charges for doctors’ services, with the patient paying the other 20%. But an individual doctor’s fee may be higher than the level covered by Medicare, with the beneficiary responsible for paying the difference. These “excess charges” totaled $2.4 billion last year for the Medicare beneficiaries, according to Chris McEntee, a legislative representative for the American Assn. of Retired Persons.

“We hear a lot of complaints that beneficiaries are not well protected from the costs of physicians’ fees, that fees are going up too fast,” McEntee said.

467 Diagnostic Categories

The growth in hospital costs under Medicare has been slowed dramatically by a system that classifies all medical conditions and treatments under one of 467 diagnostic categories, each with a fee fixed in advance by the federal government.

The Health and Human Services study, being compiled in response to a request from Congress, is exploring the best way to control the amount of money spent for physicians’ services. “We are considering the pros and cons of a number of proposals,” the department spokesman said, emphasizing that the report is still “in draft status.”

Among the possible cost control measures:

--A schedule of fixed fees, set in advance, for each separate service performed by a doctor. An office visit, a chest X-ray or removal of a wart, for example, would be priced individually.

--A fee schedule for diagnostic groups, as is done for hospitals. For example, the doctor might get one overall fee for an appendectomy, without any separate calculations for the costs of laboratory tests, the operation and a post-recovery office visit.

--A single fee for a Medicare patient, regardless of the particular treatment. The doctor might get paid annually, or perhaps monthly, with the amount determined by what the government spends for a typical Medicare patient. (This type of “cap” plan is used by some health maintenance organizations, in which patients pay a fixed fee for complete coverage with no additional charges, regardless of how often they need medical services.)

More Direct Control

The diverse cost-control methods all have a single goal: to give the federal government more direct control over the money spent for physicians’ services to Medicare enrollees. Outlays jumped to $14.3 billion last year, up from $4.2 billion as recently as 1977. The cost of physicians’ services, up 7% last year, rose much faster than the general inflation rate of 4.3%, according to figures compiled by the House Ways and Means Committee.

Any changes in the current Medicare system would require congressional approval. There is a strong impetus for action, the desire to save money at a time of huge federal budget deficits. “We want very much to get away from the system we have now,” said a staff member at the Senate Finance Committee, which handles Medicare legislation.