Paying More For Primary Care: Can It Help Bend The Medicare Cost Curve?

Submitted By winniem29
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March 2012

Issue Brief
Paying More for Primary Care: Can It Help Bend the Medicare Cost Curve?
J ames D. R eschovsky , a RkaDipta G hosh , k ate s tewaRt , anD D eboRah c hollet

The mission of The Commonwealth Fund is to promote a high performance health care system. The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the authors and not necessarily those of The Commonwealth Fund or its directors, officers, or staff.

ABSTRACT: The health reform law boosted Medicare fees for primary care ambulatory visits by 10 percent for five years starting in 2011. Using a simulation model with realworld parameters, we evaluate the effects of a permanent 10 percent increase in these fees. Our analysis shows the fee increase would increase primary care visits by 8.8 percent, and raise the overall cost of primary care visits by 17 percent. However, these increases would yield more than a sixfold annual return in lower Medicare costs for other services—mostly inpatient and postacute care—once the full effects on treatment patterns are realized. The net result would be a drop in Medicare costs of nearly 2 percent. These findings suggest that, under reasonable assumptions, promoting primary care can help bend the Medicare cost curve.
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For more information about this study, please contact: James D. Reschovsky, Ph.D. Senior Fellow Center for Studying Health System Change

To learn more about new publications when they become available, visit the Fund's Web site and register to receive e-mail alerts. Commonwealth Fund pub. 1585 Vol. 5

Among provisions in the Affordable Care Act of 2010 is a temporary, five-year, 10 percent increase in Medicare payments for primary care services. The law defines these services as office and other ambulatory visits furnished by primary care physicians (PCPs)—including family practice physicians, general internists, geriatricians, and pediatricians—as well as nurse practitioners, clinical nurse specialists, and physician assistants. For practitioners to qualify for these higher payments, at least 60 percent of their Medicare-allowed charges in a prior period must be for primary care services.1 Congress intended this provision, along with others in the law, to reorient health care delivery toward more primary care by providing primary care practices with new resources. In this issue brief, we use a simulation model with empirically based parameters to assess this underlying assumption in the context of a permanent increase in payments for primary care. Although legislators originally included the fee increase as a permanent budget-neutral provision, offset by fee cuts to other physicians, opposition by


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specialist groups killed the budget-neutrality component. Instead, Congress made the provision temporary to keep the legislation’s estimated costs—as scored by the Congressional Budget Office (CBO)—in line with the Obama administration’s spending target. While many legislators may have assumed that the temporary fee increase would become permanent (like other temporary changes to fee schedules), whether medical practitioners make this assumption is less clear. If they perceive the increase as temporary— which is likely, given the current political emphasis on deficit reduction—the provision will be less effective in achieving its goals. By itself, a five-year, relatively modest fee increase is unlikely to influence medical students to pursue careers in primary care. Nor is a temporary increase likely to affect primary care providers’ business decisions to invest in practice changes, such as by adopting health information technology or hiring “physician extenders,” who include nurse practitioners and physician assistants.