‘Revising Medicare Fees’

Your editorial “Revising Medicare Fees” (March 27) was dead wrong in stating that “doctor fees have been the most rapidly rising cost element of Medicare, increasing 17% a year” and “now consume 57% of Medicare funds.” According to the Health Care Finance Administration, total Medicare outlays in 1988 were $86.5 billion of which less than 30% ($24.4 billion) went for physician services. The largest component of the Medicare budget is payments to hospitals--Medicare Part A--which in 1988 totaled $52.5 billion. Outlays for Medicare Part B, which includes such things as hospital outpatient care, home health care and independent laboratory services as well as physician services, came to almost $34 billion in 1988. It is Medicare Part B that is growing at a rate of 17% per year.

Medicare Part B, however, is growing at least partly by design. Medicare implemented the DRG (for Diagnostic Related Group) Program in 1984 to provide more care for patients in doctors’ offices or as hospital outpatients instead of in expensive hospital beds. The goal was to shift costs from Part A to Part B of the Medicare budget, and of course, to save money. Physicians now bill Medicare for care given in their offices which was previously delivered in hospitals. And many tests and procedures that used to require hospitalization are performed on an outpatient basis. The fastest rising component in the Medicare budget is not physician services but payments for hospital outpatient services, which grew by an average annual rate of more than 25% between 1980 and 1986.

While the pay out for physician services has also increased, the rate at which Medicare pays physicians has barely gone up at all. Medicare froze fees for 40 months between 1983-87 and since then has kept tight controls on them, allowing less of an increase than the rate of inflation.

Physicians, too, are concerned about the increasing Medicare budget and some of the proposals from the Physician Payment Review Commission (PPRC) described in your editorial have obvious merit. The relative value scale developed by Harvard University would seem to be a vast improvement over the current complex, distorted and bureaucratic Medicare physician payment schedule.

We must recognize, however, that much of the growth in the Medicare budget is fueled by more people demanding more service, particularly the latest technological advances such as MRI (magnetic resonance imaging) scans or heart bypass surgery. We should accelerate efforts to curtail unnecessary and Medicare inappropriate medical services because it will improve care for patients as well as save money, something all reputable physicians support. However, I do not share your enthusiasm for the PPRC’s proposal for “expenditure targets” which you describe as an incentive for doctors to eliminate unnecessary services. Expenditure targets really means expenditure caps and would be a system of rationing care to the elderly and disabled. It would break the commitment we made almost a quarter century ago to guarantee our senior citizens all the medical care they need. We must not do that.

REINHOLD A. ULLRICH, M.D.

President

Los Angeles County Medical Assn.