Short-Term Fixes to the Sustainable Growth Rate Process . 2.1 Spending Trends

10/30/2006

Medicare allowed charges increased from a total of just under $45 billion in 1996 to almost $82 billion in 2004, a 51 percent increase (Figure 1)2.  Most of this spending was for physician services included in spending estimates used in the SGR payment update process.  If spending on chemotherapy and other drugs and on lab tests are subtracted from spending, ‘SGR physician’ spending in 1996 and 2004 was about $40 billion and $68 billion, respectively. 

While spending on E&M services and procedures remained at about 40 percent of total Part B spending ($18 billion in 1996, and $33 billion in 2004), E&M spending as a share of SGR physician services increased from about 45 percent to 48 percent.  In 2004, expenditures for procedures (major and other, over $20 billion) accounted for about 30 percent of total SGR physician spending, and imaging spending accounted for about 17 percent ($12 billion).  Over time, the proportion of SGR physician spending for procedures declined from 34 to 30 percent, whereas the share of spending on imaging procedures increased from 12 to 17 percent.

Figure 1.  Medicare Allowed Charges by Type of Service, 1996-2004

spending chart 1996-2004:lab tests,imaging,chemotherapy and other drugs,procedures,E&M,other. Shows steady increases since 1997.

Source: NORC examination of PSPSMFs

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