Study Finds Medicare Policies Boost Cost of Doctors’ Services

Medicare’s payment policies are inherently inflationary and have fueled increases in the cost of doctors’ services, a congressional report said Thursday.

The report by the congressional Office of Technology Assessment said it is time for Congress to come up with a new formula for paying doctors’ fees and to discourage additional and more expensive services.

“Medicare’s payment methods have fueled increases in expenditures for physician services, which are now one of the most rapidly growing parts of the federal budget,” the report said.

Rising Expenditures

Since 1980, total Medicare expenditures for doctors’ services have risen 16% each year, reaching an estimated $19 billion in 1987.

Set monthly voucher payments for doctors’ services offer the best chance to control the growth in Medicare spending without increasing costs to elderly patients, the analysis concluded.

A so-called “capitation” payment system “has the advantage of having shown that it can reduce expenditures for care, apparently without compromising quality,” the report said.

However, there are problems, it said. The techniques involved in setting up such a system are so new that resulting health care plans might discriminate against some Medicare beneficiaries who need more medical care while seeking out healthy beneficiaries who need less care, it said.

Reagan Goal

The Medicare analysis appeared to bolster the Reagan Administration’s commitment to a long-term goal of a voucher payment system for Medicare.

Such a system would be similar to existing health maintenance organizations, or HMOs. Medicare would make a set monthly payment to the HMO or similar group, and the group would provide all the needed medical care.

Medicare beneficiaries already have that option, the OTA analysis noted.

Under the proposal analyzed by OTA, such a prepaid plan would be mandatory under Medicare, though it could involve a payment to a health insurance carrier rather than to an HMO.