Congress to Examine Soaring Medicare Cost : 10-Month, 20% Climb in Physicians’ Billings and Biggest-Ever Premium Hike Spur Action

“It seems that every time somebody has a headache or falls down, they go to a doctor who orders a CAT scan,” says Eva Skinner, a retired Los Angeles nurse and board member of the American Assn. of Retired Persons. The expensive scanner, a sort of super X-ray, “can be life saving,” she says, “but too often it’s just used routinely.”

Costly technology--and an eagerness to use it--are two of the primary reasons that doctors’ bills are soaring for the nation’s Medicare program, which serves 30 million elderly and disabled people.

By law, recipients pay 25% of the cost of Medicare Part B coverage--for their doctors’ bills--and the government pays the rest. Because doctors’ charges to Medicare recipients rose 20% in the 10 months ending in July, Medicare Part B premiums will climb from $17.90 a month now to $24.80 in January, the biggest increase ever.

Hearings Slated

The increase, announced by the Reagan Administration on Sept. 15, stunned Medicare recipients and politicians alike. An agitated Congress will begin the first in a series of inquiries Wednesday when the House Ways and Means Committee examines the causes of runaway medical inflation at a hearing.

The committee will find that doctors’ bills are increasing in seeming defiance of normal economic laws: The supply of doctors is growing faster than the general population, but that is only spurring the demand for more and better medical care.

Federal officials say four factors contributed to the 20% rise in spending for doctors’ bills under Medicare:

--An increase in the volume and intensity of medical tests and procedures, 9%.

--Increased doctors’ fees, 7%.

--Growth in the number of Medicare beneficiaries, 2%.

--More prompt government payment of Medicare bills, 2%.

“This is not a dramatic new problem but a continuation of a long-term trend,” said Glenn Hackbarth, deputy chief of the government’s Health Care Financing Administration, which runs Medicare. “For years we’ve been looking for ways to get a better grip on it.”

Congress tried to get at one source of the problem in 1984 when it froze doctors’ fees to Medicare patients. But the freeze, in effect for more than two years before Congress lifted it as of last January, failed because doctors found ways to evade it.

“If you’re confronted with a freeze on fees, and your malpractice insurance is rising, and the cost of running an office goes up, how do you survive?” said Dr. Robert Butler, chairman of the geriatrics department at Mt. Sinai Medical Center in New York. “You increase the number of patients, or the frequency you see them, or the procedures you do upon them.”

“It’s a much tougher problem,” added Hackbarth, “to control the number of visits (to doctors’ offices) and the number of tests and procedures.”

In fact, Congress may have inadvertently contributed to the increase in visits to doctors’ offices--and thus aggravated the problems facing Part B of Medicare--with its efforts to limit the cost of Part A, which covers hospital stays without charging recipients a premium. Congress in 1983 adopted reforms that encourage hospitals to admit fewer Medicare recipients and to discharge those whom they admit as quickly as possible.

To Doctors’ Offices

Consequently, some patients who might have been treated in hospitals before 1983 are going to doctors’ offices now.

“Their office population is sicker, to some extent, than it was before,” said Dr. Robert Rubin, a former assistant secretary of Health and Human Services and now executive vice president of ICG Inc., a Washington consulting firm. “In the past, the doctors may have just thrown these people into the hospital.”

Medical tasks once commonly done in the hospital, such as cataract surgery and hernia repairs, are now performed in so-called ambulatory care centers, or “surgi-centers.” Fees for such operations are strictly controlled when they are performed on Medicare patients in hospitals.

But Part B of Medicare, which lacks the same cost controls, governs these operations when they are carried out in ambulatory care centers. Dr. William H. Moncrief Jr., president of California Medical Review Inc., which reviews the quality of Medicare services in California, said that switching cataract surgery away from hospitals drove up the cost of the operation by 40% in his state.

Other factors also are playing a significant role in driving up doctors’ costs. The growing expense of malpractice insurance, for example, has increased the pressure on doctors to earn more.

And the threat of malpractice suits has bred the costly practice of defensive medicine--performing every conceivable test, no matter how expensive, to forestall lawsuits later. “If a doctor worries about malpractice,” Moncrief said, “he’ll be very careful to do all the extra steps.”

More than that, Moncrief added, doctors are being trained in medical school to take advantage of all the new medical technology.

“Younger physicians are more procedure-oriented,” he said. “The idea of the old country doctor, who does laying on of hands and says, ‘I’ll come and see you tonight,’ just doesn’t go anymore.”

Lower Priority

Dr. Leonard V. Fisher, chairman of geriatrics at Oak Forest Hospital in Oak Forest, Ill., said that many doctors once assigned their elderly patients a lower priority than their younger ones.

“We’ve raised the consciousness of physicians to the health needs of older patients,” Fisher said. “Doctors no longer say: ‘This is old age, what do you expect?’ ”

Similarly, he said, elderly patients and their families expect and demand more from their doctors. Thanks to Medicare, they are largely shielded from the cost of tests and treatment--shielded, that is, until the combined weight of all rising doctors’ bills forces up Medicare’s Part B premiums.

The same forces are driving up doctors’ bills for patients under 65. “We’ve been watching prices rise and we’re appalled by it,” said Benno Isaacs, a spokesman for the Health Insurance Assn. of America. “Trying to hold down health care costs is our version of World War III.”

Eugene Carter, vice president of the Travelers Cos., a major health insurer, said that costs have risen in the face of such safeguards as requiring second opinions before insurance companies will pay for surgery.

Organized medicine’s position is simple: Don’t blame us.

“We are especially concerned that the finger pointing, in most cases at physicians, doesn’t get to the root of the problem or encourage constructive solutions,” Dr. Joseph F. Boyle, executive vice president of the American Society of Internal Medicine, said in a recent memo on the Part B Medicare premium hike.

“Quick-fix, ill-advised fee and payment controls by Congress won’t work,” Boyle wrote, because factors outside the control of doctors are largely responsible for soaring doctors’ bills.

The ultimate solution, Reagan Administration officials believe, is to rely on the forces of the marketplace to hold down doctors’ costs. The Administration is encouraging Medicare beneficiaries to enroll in health maintenance organizations or other groups that, for a flat fee, provide comprehensive care and make no additional charges regardless of the amount of medical services required. Suppose the government was now spending $1,000 a year for the typical Medicare enrollee in Los Angeles. It could save money by paying $950 to Los Angeles HMOs for each Medicare recipient they enrolled. The HMOs would try to attract Medicare recipients by offering them benefits that Medicare does not provide, such as glasses and dental care.

Under that arrangement, the HMOs would face strong incentives to hold down costs. If they could provide care for less than $950, they would keep the profits. Otherwise, they would take the losses.

No Longer Burdened

No longer would Medicare be burdened by rising charges for doctors’ services. That would become the problem of the HMOs and other group medical practices.

Experience to date suggests that some Medicare recipients who have enrolled in group practices are pleased, while others object to waiting in long lines for medical care and to being unable to choose their own doctor. As for the group practices, some have thrived but others, including one in California, have underestimated the cost of caring for the elderly and have gone bankrupt.

Critics wonder if the quality of health care ultimately will suffer. Doctors own or receive salaries from group practices, and their income depends on their expenses. Will they tend to stint on tests and procedures to hold costs down? Congress, aware of these concerns, passed a law last year that bans certain profit-making arrangements for doctors in group health-care plans.

“I still think the majority of physicians have the best interest of patients at heart,” said Moncrief of California Medical Review. “By far the great majority do the best they can for the patients. Those doctors who give in to the bottom line have given up their birthright.”

In any event, switching the financial woes of Medicare from the government to the private competitive marketplace will not happen soon. Only 1 million of today’s 30-million Medicare beneficiaries are now enrolled in group plans.

Meanwhile, Congress will keep struggling with the cost of physicians’ services. Although there was much grumbling about the increase in the Part B premium, there is little sentiment in Congress for cutting it back by shifting a greater share of Medicare’s costs from beneficiaries to the government.

California Rep. Edward R. Roybal (D-Los Angeles), chairman of the House Aging Committee, said: “No matter what else we do, we must move as soon as possible to put in place a better physician payment system with volume controls . . . and a fair and predictable annual limit on fee increases.”