Medicare Physician Payment

Geographic Adjusters Appropriate But Could Be Improved With New Data Gao ID: HRD-93-93 July 20, 1993

In January 1991, Medicare began using a new way to determine the amounts it will pay for physician services. Rather than basing payment on what doctors charge for services, Medicare now uses a fee schedule that incorporates a resource-based relative value scale. Under this new schedule, each service receives a value reflecting the work and other resources needed to furnish it. Geographic differences, such as staff salaries and office rents, are factored into the values. Some doctors, particularly those in areas with a high cost of living, have complained that the values do not reflect actual cost differences. GAO concludes that the Health Care Financing Administration's (HCFA) choices of data and methodology for developing the geographic adjusters were reasonable. Except for expanded malpractice data, however, HCFA had not planned to use different data sources to update the geographic adjusters for 1995. Internal Revenue Service (IRS) data may be useful in updating the geographic adjusters. HCFA is working with IRS to assess the feasibility of using IRS data in updating the practice-expenses adjuster. Because HCFA will need only summary data, taxpayer privacy concerns do not appear to be an issue.

GAO found that: (1) time constraints limited HCFA ability to develop data sources for use in establishing geographic adjusters; (2) HCFA contracted with several research organizations to develop recommendations about data and methodologies for the geographic adjusters; (3) Internal Revenue Service (IRS) data could be useful for future updates of the practice-expense and physician-work adjusters; (4) an adequate number of cases can be obtained for most Medicare localities due to the universal nature of IRS data; and (5) data on the relative differences in health care costs across geographic areas were not available.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Team: Phone:


The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.