The recent growth in Medicare expenditures for physician services has more to do with the increases in the volume and intensity of services provided than changes to Medicares payment rates, the Congressional Budget Office reported in a background paper. The CBO in its report examined Medicares payments to physicians from 1997 to 2005, the period in which the sustainable growth rate, or SGR, has been in place. During this time period, the quantity of physician services increased by more than 39%, most of which is attributable to medical practice changes rather than physician responses to changes in their payment rates, the CBO reported. After medical price inflation is taken into account, Medicares payment rates for such services actually declined slightly during this period by 14%. The CBO attributed the decline to changes in the conversion factor of the SGR, which is tied to the health of the economy, and used to calculate physician payments. Unless its replaced, payments are expected to drop by 10% in 2008 and more than 40% by 2015.
Medicare spending growth tied to volume, CBO says
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