Supplementary medical insurance benefit for physician and supplier services - Medicare and Medicaid Statistical Supplement

Health Care Financing Review, Annual, 1992 by Charles Helbing, John T. Petrie

Introduction

In this chapter, we present utilization and charge data by selected provider, and beneficiary characteristics for physician and supplier services to Medicare beneficiaries during calendar year 1990. For selected years from 1970 to 1990, trend data are shown for gross national product (GNP), personal health care expenditures (PHCEs), national physician expenditures, total Medicare expenditures, and Medicare physician expenditures, excluding supplier services, except for independent laboratories (Table 7.1). Also included for selected years from 1967 to 1990 are Medicare Part B disbursements by type of provider (Table 7.2). The total (submitted and allowed) Medicare physician and supplier charges for calendar year 1990 represent about 95 percent of the total Medicare physician and supplier charges reported. This shortfall is because of factors related to the Health Care Financing Administration (HCFA) statistical database used to prepare Tables 7.7-7.17 including sample size, editing procedures, and data specificity and availability. The shortfall should not affect the data presentation or its corresponding description. The national and Medicare physician expenditures and disbursement data in Tables 7.1 and 7.2 represent 100-percent population estimates.

[TABULAR DATA 7.1, 7.2, 7.7-7.17 OMITTED]

Under the Medicare program, physician services--those provided by doctors of medicine and osteopathy, doctors of dental medicine and surgery, doctors of optometry, doctors of pediatric medicine, and chiropractors licensed under State law--are covered by the Medicare Part B supplementary medical insurance (SMI) program. SMI also pays for services and supplies provided by suppliers (e.g., medical supply and ambulance companies, independent laboratories and portable X-ray suppliers billing independently, voluntary health and charitable organizations, and pharmacies). In addition, SMI helps pay for covered services received from certain practitioners who are not physicians, such as certified registered nurse anesthetists, certified nurse midwives, physician assistants, and clinical psychologists. Physician and supplier services covered by SMI include diagnosis; therapy; surgery; consultation; home, office, and institutional visits; diagnostic X-ray tests; X-ray therapy; outpatient surgical center services; outpatient hospital diagnostic services; outpatient physical therapy and speech pathology; rental or purchase of durable medical equipment; surgical dressings, splints, casts, and other devices used for reduction of fractures and dislocations; ambulance services; institutional and home dialysis; prosthetic devices; and rural health clinic services (Health Care Financing Administration, 1991a). Each year Medicare pays for about 500 million claims submitted by about 600,000 different physicians.

Medicare allows physicians to determine how they will be paid for covered services rendered to beneficiaries. If the physician elects to be paid directly by the SMI carrier (the fiscal agent authorized to determine whether the service furnished is covered by Medicare, and the payment due) the payment is deemed "assigned." By accepting assignment, the physician agrees to accept as payment in full the amount the carrier determines as reasonable, i.e., the allowed charge. Medicare pays 80 percent of the allowed charge (after the beneficiary has met the annual deductible amount), and the beneficiary is responsible for the 20-percent coinsurance amount, as required by law. If the physician does not accept assignment, the beneficiary is responsible for paying the physician the difference (the balance billing amount) between the physician's submitted charge and the Medicare allowed charge, as well as any deductible or coinsurance amounts. Beginning January 1, 1991, the annual deductible increased from $75 to $100, and the amount of the beneficiary's liability for balance billing was limited as specified in the Medicare Physician Payment Reform Program Legislation of 1989 and 1990, the Omnibus Budget Reconciliation Act (OBRA) of 1989 (Public Law 101-239); and OBRA 1990 (Public Law 101-508).

Under the Medicare physician payment system in effect from July 1966 to December 1991, Medicare paid for physician services on a fee-for-service basis known as the customary, prevailing, and reasonable charge payment system (CPR). From 1967 to 1983, the average annual rate of growth of Medicare benefit payments for physicians' services under CPR was 17.1 percent. In an attempt to constrain the rate of growth in physician expenditures, the Deficit Reduction Act (DEFRA) of 1984 (Public Law 98-369) placed a freeze on Medicare physician payment levels for a 15-month period beginning July 1, 1984. DEFRA 1984 also created the Participating Physician and Supplier Program (PAR), which became effective in July 1984. Under PAR, participating physicians and suppliers enter into an agreement with the Medicare program to accept assignment for all covered services, that is, to accept the carrier's determination of the reasonable charge as payment in full. The agreement is made for a defined period of time, usually 1 year. Medicare provides incentives to encourage physicians to participate in PAR. For instance, participating physicians are identified by the program, and beneficiaries are encouraged to use their services. Congress extended the freeze on Medicare physician payment levels through April 1986 for participating physicians, but through December 1986 for non-participating physicians. PAR resulted in a substantial increase in the Medicare assignment rate, which reached approximately 82 percent in 1990, up from 51 percent in 1983.