Medicare faces a "fundamental physician spending growth problem" given recent increases in volume and intensity of care, the General Accounting Office said in a report released today. The problem will persist regardless of whether the current "sustainable growth rate" formula for updating physicians' Medicare payments is replaced with a tool favored by the Medicare Payment Advisory Commission, the GAO said. Under the "sustainable growth rate" formula, physician rates are adjusted up or down annually to meet an established target for Medicare spending on physician services. The Medicare reform law gave physicians a 1.5% rate increase for 2004 and 2005, averting scheduled decreases, but did not make corresponding revisions to spending targets. Doctors will see their Medicare payments cut roughly 5% annually for seven consecutive years beginning in 2006 if the formula isn't changed, the GAO said.
The system "is a budgetary device, not a health policy tool," said Douglas Holtz-Eakin, director of the Congressional Budget Office, in testimony before the House Energy and Commerce Committee. To read the report, go to the GAO's Web site, click on "GAO Reports" on the left-hand navigation bar and then on "Today's Reports." -- by Jeff Tieman