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Where is the Money Going?

Last week, the Center for Medicare and Medicaid Services (CMS) released an extensive database of Medicare providers who receive payments from the federal government. The database contains a complete list of federal Medicare providers, including full name, address, and professional specialty. The data include payment amounts, number of beneficiaries’ services, and the number of services conducted by each provider.

Much has been made about the enormous payments made to the highest paid Medicare providers. Critics claim there is waste and fraud in the system. Some of the highest paid doctors have also been linked to large contributions made to politicians connected to the budgeting of the Medicare program. Before we assume too much, let’s break it down by the numbers:

In 2012, spending on Medicare benefits totaled $536 billion, accounting for 16% of all federal spending.  It accounted for about 21% of all national health care spending, 28% of spending on hospital care, and 24% of all spending on physician services (Kaiser).

There were 3,972 individual doctors who received payments of $1 million or more from Medicare in 2012. Of the top 50 highest paid providers, the average annual Medicare payment was $7.5 million. Of these top 50, an average of 840 Medicare beneficiaries were treated per provider, meaning that the average patient ran up nearly $9,000 in Medicare costs. There is not, however, a strong correlation between number of beneficiaries receiving services and the amount paid to providers. The largest reimbursement payment of $20.8 million was made to Dr. Salomon, an ophthalmologist in FL, who serviced 894 beneficiaries in 2012. The 500th to 1,000th highest paid physicians on average serviced 1,405 Medicare beneficiaries during the year, a higher average than the top 100 highest paid.

Another extraordinary statistic jumps out of the data: the top 2 percent of doctors account for nearly a quarter of all provider reimbursements, $15.1 billion of the total $63.9 billion. In contrast, the lowest 75 percent of doctors accounted for just one quarter of the payments, or $15.5 billion.

What these figures can’t capture are the complexities of many medical institutions or practices and the payment structures of their doctors. It is impossible to know how much of the Medicare payments are being pocketed by providers versus funds allocated to expensive technologies and procedures. Many physicians, listed as individuals, are actually salaried employees of a clinic or medical facility. To identify idiosyncrasies in Medicare reimbursements, it would require investigating each organization or physician individually.

What the data do emphasize is that Medicare physicians are submitting large receipts for reimbursement and the cost of the program is exceedingly high. To control the cost of health expenditures, including those of taxpayer-supported federal programs, it would be useful to be able to make meaningful comparisons in costs and outcomes between providers. That will help in uncovering excess costs and identify practices that are inflicting unnecessary expenses that drive up healthcare costs.

[Photo: Flickr/]

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