Medicare Bonus Payments Doing Little To Resolve Doctor Shortage

For Release

July 8, 2003

A Medicare incentive program designed to convince more physicians to practice in medically underserved areas is failing to achieve its goal, according to a RAND Health study released today.

The incentive program allows doctors in rural and urban areas facing shortages of physicians to collect 10 percent more than doctors in other areas for medical services they offer under Medicare, the federal health insurance program for the elderly and disabled.

The 10 percent bonuses largely have gone unclaimed, according to the study appearing in the July 8 edition of the journal Health Affairs.

“We found that a lot of physicians who could be collecting the payments aren't asking for them,” said researcher Lisa Shugarman, who authored the report with RAND colleague Donna Farley. “We don't know why. They may not be aware they qualify, the paperwork may be onerous or they may be concerned about being audited.”

RAND researchers examined bonuses paid by Medicare in 1992 through 1998. The researchers found the payments accounted for less than 1 percent of the fees the program paid to physicians in underserved rural regions each year.

While the bonuses totaled $25 million in 1991 and rose to $42 million in 1996, they declined to $36 million by 1998, according to the study. During the same period, overall Medicare payments to rural physicians rose from $5 billion in 1992 to an estimated $7.4 billion in 1998.

“It's remarkable how small the cost of this benefit was to Medicare,” Shugarman said. “The bonus program has cost Medicare less than $1 per beneficiary per month.”

Researchers say they did find one positive trend that may be influenced by the Medicare bonuses.

While the number of primary care physicians collecting the bonus payments shrank during the study period, there was a 25 percent rise in the proportion of bonus payments made for primary care services. This suggests that more medical specialists are providing primary care services, a positive trend that may be encouraged by the bonuses, researchers said.

Researchers recommend that federal officials survey rural physicians to ask why more are not collecting the bonus payments and to determine whether regional Medicare administrators have done enough to educate physicians about the opportunity.

Shugarman said the findings may provide support to Congressional efforts to double the size of the bonuses to 20 percent. Unsuccessful efforts to raise the bonus payments have been made in the past, including one that was dropped in the last session of Congress.

The physician bonus program is one of several efforts federal officials have made over the past two decades in an effort to support threatened health care resources in rural areas, where there often is a shortage of physicians and many hospitals have closed for financial reasons.

Congress decided in 1987 to offer a 5 percent bonus to physicians who treat Medicare recipients in rural areas officially designated as having a shortage of health professionals. In 1991, the bonus was increased to 10 percent and extended to medically underserved urban areas as well.

RAND was asked by the federal Centers for Medicare and Medicaid Services to examine whether the Medicare bonuses and other programs were meeting the goal of supporting and expanding medical services in rural areas. Researchers say the physician bonus payments were the least effective of all the efforts they examined.

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