Medicare Premium Hike May Worsen

Medicare billings by doctors have spiked by more than 15%, the head of the program said Thursday, and that could force elderly beneficiaries to pay an additional $11 per month in premiums next year.

The billings are for Medicare’s Part B, an optional program that covers patients’ visits to doctors, including tests and minor procedures performed in medical offices.

Medicare Administrator Mark McClellan said that a new analysis of healthcare data had overtaken last week’s forecast by Medicare trustees that the premium would rise to $87.70. Instead, McClellan said, the premium could go up to $89.20 next year.

Currently, the figure is $78.20.

The $11 monthly increase would mark the second consecutive year of double-digit premium hikes for the 39 million beneficiaries who participate in Part B.

“This is a strain over time for beneficiaries’ budgets and for the Medicare budget,” McClellan said.

“For seniors, it could be quite an eye-opener,” said Tricia Neuman, a health policy expert with the Kaiser Family Foundation. Premiums for Part B are set annually to cover 25% of the program’s cost; the remaining 75% comes from taxpayers.

The release of the new projections appeared to be tied to a broader debate in Congress over the fees paid to doctors by Medicare, the government healthcare program for the nation’s elderly and disabled.

Current law calls for an estimated 4.3% cut in reimbursements to doctors next year. Doctors say that could force them to stop taking Medicare patients, and the Medicare Payment Advisory Commission, an independent panel of health policy experts that advises Congress on Medicare issues, has recommended a 2.7% increase instead.

The new figures suggest that increases in the volume of services that doctors deliver may provide enough income to offset a reduction in fees. Medicare payments to physicians grew from $76.7 billion in 2003 to $88.3 billion in 2004.

McClellan said the surge in costs appears to be driven by more intensive tests and treatments provided to chronically ill patients in doctors’ offices. But some of the services -- including more frequent imaging scans for certain conditions -- may offer little or no medical benefit.

“We need to do more to understand which have health benefits and [which] are more questionable,” said McClellan, a doctor who has made his career in health policy. While some services do have benefits, “there hasn’t been anything published in the medical literature to suggest that a 25% increase in the imaging rate is medically appropriate,” he added.

For example, he said, patients with congestive heart failure may not benefit from frequent echocardiograms as much as they would from diligent reminders to take their medications and adopt more healthful lifestyles.

Medicare has asked the payment advisory commission to take a closer look at the reasons for the cost spike. “It’ll be important to understand which services contribute to health improvements and which are more questionable,” said Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee.

McClellan said that Medicare was watching doctors’ billings, and that physicians who provided much more services than their peers might start getting calls from the government.

The American Medical Assn. reacted sharply, saying that Medicare has added coverage for many new diagnostic tests and surgical procedures. Doctors are simply providing covered services, the organization said.

“Conditions that once required hospitalization now are routinely treated in physicians’ offices at a lower cost to the government and patients,” Dr. J. James Rohack, chairman of the AMA board, said in a statement. “Medicare should recognize and reward these advances rather than penalize physicians for these important improvements in patient care.”

Medicare may be fighting a losing battle against long-term trends toward more intensive care in doctors’ offices.

“It’s hard to argue that what doctors are doing is unnecessary,” said economist Paul Fronstin of the nonpartisan Employee Benefit Research Institute. “Why shouldn’t they be doing more echocardiograms? Maybe they weren’t doing enough before.”

Fronstin said he expected Medicare physician payments to keep increasing after the new outpatient prescription benefit takes effect next year. “Patients are going to have to go see their doctors in order to get refills,” he said. “Once the refill runs out, the doctor is going to want to see the patient.”