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Date: Wednesday, May 10, 1995
FOR IMMEDIATE RELEASE 
Contact: HCFA Press Office (202) 690-6145

Secretary Shalala said the update recommendation would require Congress to change the law covering Medicare's payments to physicians. If Congress does not enact this recommendation by Oct. 31, the update will be based on a "default" formula set by a 1989 law and will go into effect on Jan. 1.

The "default" estimate under the current law's formula, Secretary Shalala said, would result in updates for Medicare physician fees in 1996 of a 3.9 percent increase for surgical services, a 2.2 percent decrease for primary care services and a 0.6 percent increase for other nonsurgical services. This would result in a weighted average update of 1.1 percent for all physician services.

Secretary Shalala's recommendation of the same increase for all categories of services reflects her commitment to promote primary care services.

Medicare spending on physician services is projected to increase from $33.3 billion in fiscal year 1995 to $37 billion in FY 1996, an 11.1 percent increase.

Current law also requires the secretary to set volume performance standards, which establish goals for the rate of growth in expenditures for physician services. The standards incorporate a formula that uses a five-year average of the growth in the volume and intensity of physician services. The 1996 standards will affect the 1998 fee updates.

Secretary Shalala recommended a change in the volume and intensity factor beginning with the FY 1996 standards. Instead of using the same factor for each of the three separate standards, Secretary Shalala recommended the use of separate volume and intensity factors for each category of service.

In today's statement, Secretary Shalala recommended to Congress that the volume performance standards for FY 1996, beginning Oct. 1, set a target of 2 percent growth for all physician services, 6.5 percent for primary care, 2 percent for other nonsurgical services and a 1.8 percent reduction for surgical services.

Under the current formula, the estimate of the performance standards is an increase of 2 percent for all physician services, 4.3 percent for primary care services, 1.2 percent for other nonsurgical services and 2 percent for surgical services.

In setting performance standards, the secretary is required by law to consider the estimated inflation rate, the projected growth in the number of Medicare beneficiaries, changes in spending due to law or regulation and other factors.