Health Practitioner Bonuses and Their Impact on the Availability and Utilization of Primary Care Services. Introduction and Purpose Of The Study


The Assistant Secretary for Planning and Evaluation (ASPE) has contracted with The Lewin Group to examine the role of physician bonus and supplemental payment programs in increasing the supply of primary care providers (PCP) and the access of patients to their services.

The Congressional Budget Office has estimated that the implementation of the Patient Protection and Affordable Care Act (ACA) of 2010 will increase the number of nonelderly people who have health insurance—by about 13 million in 2014, 20 million in 2015, and 25 million in each of the subsequent years through 2024 (CBO, 2014).8 Because those with insurance typically use more services than those without insurance, this increase in coverage will most likely result in additional pressure on a health care delivery system.9 To address concerns about maintaining an adequate supply and distribution of primary care services, the ACA includes provisions that provide temporary financial incentives to primary care providers:

  1. Section 5501 provides that from January 1, 2011 through December 31, 2015, under Medicare, eligible primary care practitioners will receive a 10 percent supplemental payment for primary care services they provide as defined by existing Evaluation and Management (E&M) codes under the new Medicare Primary Care Incentive Program (PCIP).

  2. Section 1202 of the Act provides that for the period January 1, 2013 to December 31, 2014 under Medicaid, primary care services provided by primary care physicians must be paid at rates no less than Medicare rates for primary care physicians.

The Medicare primary care incentive payment is available to the eligible primary care practitioners for services provided under selected categories of E&M codes. An eligible primary care practitioner is a physician, nurse practitioner, clinical nurse specialist or physician assistant who satisfies the following criteria: (i) enrolled in Medicare with primary specialty designation of family practice, internal medicine, pediatrics and geriatrics; and (ii) at least 60 percent of the practitioner’s allowed charges are for primary care services.10 This temporary 10 percent incentive payment is made on a quarterly basis. PCIP recipients with a family medicine Medicare specialty designation received an average incentive payment of $3,450 ($212,987,540/ 61,728) during the first year of the program.11 This payment is equivalent to a two percent ($3,450/$201,512) increase in annual income. 12

In addition, Medicaid payment rates for primary care services delivered by primary care physicians must be no less than Medicare rates for the same services in 2013 and 2014.13 Given the variability of Medicaid payments across states, this could be a substantial boost in payments for physicians in some states and less so in others. Medicare has been providing bonus payments to physicians in designated shortage areas to make these areas more attractive for physician practices. The Health Professional Shortage Area (HPSA) bonus and the Physician Shortage Area (PSA) bonus are specifically intended to address the geographic distribution of physicians.

The main purpose of this report is to present the key findings from our examination of the proposed research questions, the main data sources used for the empirical analysis, the methodologies used to identify the impact of payment incentives and detailed discussion of our analytical findings.

The report covers the three main categories of the empirical analysis:

  1. Examine the magnitude and the distribution of Medicare primary care incentive payments, and quantitatively estimate the impact of the bonus on the supply of PCPs and their services;

  2. Assess the geographic distribution of HPSA bonus recipients, understand the overlap between HPSA and Medicare primary care incentive payment (PCIP), and overlap between the HPSA and PSA bonus recipients, and quantitatively estimate the impact of the bonuses on the supply of PCPs and their services;

  3. Explore any evidence of the impact of changes in state Medicaid primary care reimbursement rates on the supply of primary care services.

A substantial portion of the empirical undertaking entailed analyzing existing Medicare claims data to understand the magnitude of these supplemental payments under Medicare and to estimate their impact on the supply of PCPs and their services. In this report we provide a detailed description of the data we use, our analytical approach and a thorough discussion of our analytical findings. The discussion in the report is organized as follows: section II presents findings from the review of relevant existing literature; in section III, we lay out the empirical methodology and main evidence related to the impact of the Medicare 10 percent primary care incentive payment; section IV describes the empirical analysis of the HPSA and PSA bonuses; section V presents the findings regarding the impact of higher primary care physician fees under Medicaid; finally, section VI is the conclusion.

8 CBO Report (February, 2014):

9 Manning WG, Newhouse JP, Duan N, Keeler EB, Benjamin B, Liebowitz A, et al. (1988). Health insurance and the demand for medical care. Evidence from a randomized experiment. Santa Monica, CA: RAND Corporation.

10 Allowed charges refer to all charges under the physician fee schedule excluding hospital inpatient care, drug, laboratory, and emergency department visits (source:.

11 Source:

12 ACA Medicare PCIP: Practitioners (MDs and Non‐MDs) with primary care specialty designation meeting a threshold of 60 percent of primary care services*will receive 10 percent bonus on the Medicare paid amount from CY 2011 to CY 2016, $558 million in 2011 translates to an average of 2 percent increase in annual income for primary care physicians.

13 The Administration is proposing to extend this payment through Calendar Year 2015 and make it available to primary care nurse practitioners and physician assistants who practice independently. (add citation to 2015 Budget in Brief when it becomes available.)

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