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1992.05.21 :  Medicare Physician Fees

Contact: Bob Hardy (202) 245-6145
May 21, 1992

       HHS Secretary Louis W. Sullivan, M.D., today recommended to
Congress that Medicare fees for physician services be increased by
2.6 percent for surgical services and 0.3 percent for nonsurgical
services in 1993.
       Secretary Sullivan recommended Medicare Volume Performance
Standards for fiscal year 1993 of 6.0 percent for surgical services
and 7.9 percent for all other nonsurgical services. 
       "These are reasonable rates of growth for Medicare spending
on physician services, consistent with our commitment to high-
quality care," Dr. Sullivan said.
     At the same time, the secretary also announced that he would
be considering a variety of possible actions to support primary
care and increase the supply of primary care practitioners in the
country.  Over the next few months, HHS will be consulting with the
Congress, physician organizations and other groups to identify
effective incentives for primary care services.
     "Primary care services are the foundation of good medical care
and of an effective health care system," he said.  "We need to
encourage young physicians to go into primary care, and we need to
be sure these providers are reimbursed fairly."

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       Among the steps Secretary Sullivan said he is considering
are:

     o    Accelerating the transition to new physician fee
          schedules under Medicare.  Under the new fee schedule
          which is now being phased in, primary care services
          generally receive a greater share of total Medicare
          reimbursement than in the past.

     o    Modification of the Medicare Volume Performance
          Standards, including a single MVPS as well as possible
          separate standards for primary care services.

     o    Emphasizing primary care training through Medicare
          graduate medical education payments.  This could involve
          a basic restructuring of GME payments to favor primary
          care and redirect GME payments to non-hospital based
          ambulatory residency training sites.

     o    Strengthening the focus on primary care in Public Health
          Service programs, including educational assistance and
          other programs.

       Volume performance standards are annual goals for rates of
increase in Medicare spending for physician services.  In the 1989
legislation to reform the Medicare physician payment system,
Congress provided that physicians' performance in meeting the goals
would be a factor in establishing the annual fee updates.  In
making the 1993 MVPS recommendation, the secretary considered
inflation, Medicare enrollment, aging of the Medicare population,
the impact of legislation and other factors.

       In making his recommendations Sullivan indicated that he
would be considering recommending a single update and MVPS for 1994
and beyond.  The Physician Payment Review Commission, an
independent 
body established to advise Congress on Medicare physician payment
issues, also recommends consideration of a single update and MVPS. 


       William Toby Jr., who directs the Medicare program as the
acting administrator of the Health Care Financing Administration,
said that "physicians and other professionals affected by the fee
schedule can be sure that we welcome their ideas and want to hear
their concerns.  We are committed to a policy of consultation and
cooperation with the medical community."

       Secretary Sullivan's recommendation for updating the fee
schedule for 1993 is based on a formula set by law to establish the
updates if they are not set by Congress.  The recommendation
reflects the degree to which the 1991 growth rates in Medicare
physician spending were greater or less than projected by the
performance standards for that year.


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       Medicare fees would increase by 2.2 percent in 1993 if the
update were to be consistent with the estimated inflation rate in
the costs of medical practice.

       However, a larger increase of 2.6 percent is recommended for 
surgical fees because the growth rate of Medicare spending on
surgical services in 1991 was 0.4 percentage points under the 1991
performance standard for surgical services.

       In contrast, the 1993 fee update recommended for nonsurgical
services is 0.3 percent because 1991 Medicare expenditures for
those services increased at a rate of 1.9 percentage points greater
than the performance standard.

       The FY 1991 performance standard for surgical services was
3.3 percent and expenditures actually increased by 2.9 percent. 
The FY 1991 standard for nonsurgical services was 8.6 percent and
expenditures actually increased by 10.5 percent.



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