Ensuring Efficient Use of Resources in Medicare

In recent years, GAO and others have reported that over the long term, the Medicare program is unsustainable in its present form. As concerns about fiscal sustainability has grown, experts agree that physicians play a central role in the generation of health care expenditures in total, because of the influence of their referrals, admissions, and orders on the services patients receive. Their services are estimated to account for 20 percent of total health care expenditures, whereas their influence is estimated to account for up to 90 percent of this spending. Medicare's largely fee-for-service payment system, in which physicians receive a fee for each service provided, encourages physicians to increase the volume of services they provide without regard to quality or outcomes. Further, the fees paid to physicians do not always recognize efficiencies that occur when certain services are commonly furnished together, that is, by the same physician to the same beneficiary on the same day. According to the Medicare Trustees, Part B spending under the Medicare physician fee schedule rose from about $37 billion in 2000 to about $57.6 billion in 2007. Spending for imaging services is one of the fastest-growing sets of services paid for under the physician fee schedule—growing from about $6.7 billion to $12.1 billion over the same time period. To address this spending growth for physicians' and related services, GAO has studied efforts by private payers and the federal government to constrain health care spending and has recommended certain reforms to encourage program efficiency. These reforms include

• Developing a physician-profiling program that includes empirically-based standards that set the parameters of efficiency, financial or other incentives for individual physicians to improve the efficiency of the care they provide, and methods for measuring the impact of physician profiling on Medicare spending and physician behavior;
• systematically reviewing services commonly furnished together and capturing these efficiencies in payments, focusing on those service pairs that have the greatest impact on Medicare spending; and
• addressing double-digit growth in spending for imaging services paid for under Medicare's physician fee schedule by examining the feasibility of more front-end payment approaches, including requirements for physicians to obtain some form of approval to ensure coverage before ordering imaging services.

In addition, the Congress should consider exempting savings realized from payment changes for services commonly furnished together from budget neutrality, so that savings accrue to Medicare.

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Medicare Physician Payments: Fees Could Better Reflect Efficiencies Achieved When Services Are Provided Together

GAO-09-647, July 31, 2009

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 35 pages)   Accessible Text   Recommendations (HTML)

Medicare: Trends in Fees, Utilization, and Expenditures for Imaging Services before and after Implementation of the Deficit Reduction Act of 2005

GAO-08-1102R, September 26, 2008

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Medicare Part B Imaging Services: Rapid Spending Growth and Shift to Physician Offices Indicate Need for CMS to Consider Additional Management Practices

GAO-08-452, June 13, 2008

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Medicare: Focus on Physician Practice Patterns Can Lead to Greater Program Efficiency

GAO-07-307, April 30, 2007

Summary (HTML)   Highlights Page (PDF)   Full Report (PDF, 53 pages)   Accessible Text   Recommendations (HTML)