The Medicare payment scale for doctors is distorted in favor of surgery, rewarding it disproportionately when compared with office visits, Dr. William B. Stason of the Harvard School of Public Health told the Senate Finance Committee yesterday.
This, he said, provides a giant incentive to perform more surgery, helping drive up Medicare costs.
Stason testified at a hearing convened by Sen. David F. Durenberger (R-Minn.) on ways to curb Medicare's outlays to doctors. Stason said he and two colleagues have done studies showing that, in general surgery, the average Medicare charge for an initial complete office visit in 1983 was $52, while the charge for a total hysterectomy was $1,100, about 21 times as high.
But the cost of performing the surgery was only 5.3 times as high as the cost of an office visit, based on his studies to measure overhead, malpractice fees, physician time, training costs, complexity of the operation and degree of clinical judgment required, he said.
Although some students of medical economics have argued that it is impossible to assign inherent values to various types of medical skills, Stason said he and colleagues William Hsaio and Peter Braun developed a method to measure resources used in providing medical services, including actual costs for offices, malpractice insurance, training and similar factors.
"Our premise is that resource inputs into physician services provide the fundamental measure of their values," he testified.
Using that method, Stason said, he found that, in cardiovascular surgery, Medicare charges for an initial office visit averaged $80 in 1983, while the charge for a coronary bypass was $3,000, 37.5 times as great. But the resource cost for a bypass was only 15 times as great.
Similarly, charges for insertion of a pacemaker were 13.3 times as high as for an office visit, but resource costs were only 3.2 times as high.
In ophthalmology, charges for an initial comprehensive eye examination averaged $50 and for lens surgery $1,100, or 22 times as much. But resource costs for the surgery were only 3 times as high as for the exam.
Stason and his associates are expected to win a major Medicare contract to study how the payment scale should be changed.
Marion Ein Lewin, associate health studies director of the American Enterprise Institute, said there is strong sentiment "to reallocate some of these resources less to specialists and more to generalists."
Former assistant secretary of Health and Human Services Robert J. Rubin said it is not clear that the Stason-Hsaio-Braun method can solve distortion problems because all they have proved is "that when you walk into the operating room you get paid more than in your office."