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1991.11.15 :  Medicare Physician Payment

Contact:  Bob Hardy (202) 245-6145
November 15, 1991

       The most significant revision of the Medicare physician
payment system in the 25-year history of the health care program
will be established by a final regulation announced today by HHS
Secretary Louis W. Sullivan, M.D.
       The new Medicare fee schedule, to be published in the
Federal Register, establishes payment levels for approximately
7,000 medical services.  The payment plan, which will take effect
beginning 
Jan. 1, 1992, is based on the relative values of the work,
overhead and malpractice expenses that physicians incur in
providing a service.
       "This final regulation will create a fairer and more
rational physician payment system," Dr. Sullivan said.  "The fee
schedule goes far toward correcting long-standing price
distortions.  The new system will bring greater predictability,
equity and consistency to physician payments.  In particular,
primary care physicians will receive fairer payment from Medicare
under the new fee schedule."
       The new fee schedule will affect almost 500,000 physicians
and 250,000 other medical professionals, such as optometrists,
podiatrists, physical therapists and others who bill Medicare for
covered services.
       Dr. Sullivan said that under the new system, Medicare
payments for primary care services will increase relative to the
fees for 
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surgical and other specialist services.  For example, payments to
physicians in family practice or general practice are estimated
to increase by about 28 percent by 1996 as compared to payments
they would have received had the current payment system
continued.  
     The fee schedule will replace the existing system based on
the billing patterns of individual physicians.   
       Gail R. Wilensky, Ph.D., who heads the Medicare program as
administrator of the Health Care Financing Administration, noted
that HHS made numerous changes in the final fee schedule from the
proposed rule.  Those changes reflect consideration and analysis
of more than 95,000 comments received on the proposed regulation
and a thorough review of policies necessary to implement the
provisions of the law.
       One of the most significant changes was that HHS
eliminated the unintended savings from the five-year transition
to the new fee schedule.
       "Nothing in the regulation will cause total Medicare
spending for physician services to fall below the amount that
would be spent if the current system were to continue," Dr.
Wilensky said.  In fact, as a result of all the changes in the
final regulation, physician payment levels would increase more
than 13 percent compared with the proposed rule.

       Medicare spending on services covered by the fee schedule
is projected to increase 74 percent during the five-year
transition period, from $27.3 billion in calendar year 1991 to
$47.5 billion in 1996.

       Congress enacted the new payment system as part of the
Omnibus Budget Reconciliation Act of 1989, but it is a product of
several years of research authorized by congressional
legislation.


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