Seeking a Replacement for the Medicare Physician Services Payment Method
A New Approach Iimproves Health Ooutcomes And Achieves Budgetary
Savings
By Martey S. Dodoo, Robert L. Phillips, Jr., and Larry A. Green
Martey S. Dodoo is senior economist/ demographer at the Robert Graham Center, a center for policy studies in family medicine and primary care, in Washington, DC. He earned his Ph.D. from the University of Pennsylvania. He also has a graduate degree in economics from the University of Western Ontario (Canada).
Robert L. Phillips is the director of the Robert Graham Center. He earned his M.D. from the University of Florida College of Medicine. He also earned an M.S. in Public Health from the University of Missouri- Columbia, where he obtained his medical residency training in family medicine.
Larry A. Green is the senior scholar in residence at The Robert Graham Center and a professor at the University of Colorado. For 14 years, he was the chairman of the Department of Family Medicine at the University of Colorado. He earned his M.D. from Baylor College of Medicine and obtained his medical residency training from the University of Rochester and Highland Hospital.
Business and government spending on physician services have soared over the last few decades. Most payers for services traditionally peg their payment rates to Medicare. However, most consider the current Medicare single payment rate flawed because it fails to improve health outcomes or control spending. Everyone wants to replace it, but good replacements have not been identified. We estimated elasticities of the single-payment rate with respect to several of its determinants, proposed a replacement— a service-specific payment rate—for the single-payment rate, and estimated the budget implications of this replacement. Key findings are that the single-payment rate is relatively inelastic to the Sustained Growth Rate (SGR)1 and expenditure levels and that the proposed service-specific payment rate promotes primary care, controls spending, and saves money.
This research was carried out on behalf of Robert Graham Center for Policy Studies in Family Medicine and Primary Care. The Robert Graham Center is a division of the American Academy of Family Physicians (AAFP) but the information and opinions contained in research from the Robert Graham Center do not necessarily reflect the views of the AAFP. The authors are employees of Robert Graham Center and have no conflict of interest with regard to this research study.
