Medical trends behind jump in Medicare physician spending

Treatment innovations and coverage expansions played a large role in the increase.

By David Glendinning, AMNews staff. July 2, 2007.

Washington -- Physicians' reaction to declining reimbursements, for the most part, was not to blame for recent increases in the volume of Medicare services that helped drive up the amount the program pays per senior, according to a new government report.

The Congressional Budget Office found that Medicare spending on physician services jumped by more than a third between 1997 and 2005, even after accounting for growth in the number of program enrollees and the increased cost to doctors of providing care. Over this period, Medicare's payment rates for services declined when adjusted for inflation. This means the spending hike resulted from a boost in volume and intensity of physician services, not an increase in the amount doctors received for each service, the CBO states.

To some extent, doctors dialed up their volume and intensity to make up for the income loss, the report said. But the CBO investigation found that this "behavioral response" played a minor role in the equation, accounting for only 1.4 percentage points of the total 34.5% increase in per-beneficiary spending over the eight years.

The portion of the volume and intensity boost not attributable to behavioral response resulted from Medicare trends that did not involve inherently financial considerations. Medicare coverage expansions, beneficiary population changes, evolution of disease patterns and medical innovations were among the factors that caused the bulk of the increase.