Medical imaging takes rap for fueling higher Medicare costs

March 17, 2009

Overpayments, particularly for expensive imaging services, are the main culprit for increasing Medicare costs, according to the head of the influential Medicare Payment Advisory Commission.

Overpayments, particularly for expensive imaging services, are the main culprit for increasing Medicare costs, according to the head of the influential Medicare Payment Advisory Commission.

In testimony before the House Ways and Means subcommittee on health, MedPAC chair Glenn M. Hackbarth singled out medical imaging, the Medicare Advantage managed care program, and Medicare Part D prescription drug benefits for reforms to rein in rising Medicare spending.

The 2009 MedPAC report to Congress stated that imaging overpayments are particularly evident with equipment utilization assumptions in the relative value unit formula used to calculate the technical component of Medicare Part B reimbursement. Since the initial adoption of RVUs in 1990, Medicare has assumed that high-tech imaging modalities, such as CT or MRI, were used an average of 25 hours per week or 50% of the time.

This assumption, however, led to higher payments for these services and, in turn, produced an incentive for care providers to buy the machines and use them as often as possible, the MedPAC report said. The commission thus recommended changing the equipment utilization rate factor for imaging equipment costing above $1 million to 45 hours per week (90% utilization).

Anticipating today's hearing, the Access to Medical Imaging Coalition held a phone conference yesterday to rebut MedPAC's proposal. The coalition argued that the plan is based on flawed information and pointed instead to an independent 10-year analysis that suggests Medicare imaging spending dropped by nearly 20% from 2006 to 2007 while the volume of studies grew less than 2% in the same period.

"This is not what we are seeing," Cerrill Farnsworth, CEO of HealthHelp, a radiology benefit management company, told Diagnostic Imaging in an interview. "We are seeing imaging trends continue to be steep."

MedPAC report findings led lawmakers, particularly Democrats, to interpret skyrocketing costs not just exclusively in terms of high-tech imaging, but rather as excessive spending on specialized services at the expense of primary care ones. They also singled out private Medicare Advantage plans, which they said provide expensive services and incentives for patients and physicians to join these plans, all at high cost to taxpayers.

Medicare Advantage sends providers the wrong signal, Hackbarth said.

"High MA payments provide a signal to plans that the Medicare program is willing to pay more for the same services in MA than it does in traditional Medicare," he said.

Hackbarth recommended offering patients a neutral choice between public and private plans.

Subcommittee Democrats also pointed at increasing costs in the Medicare Part D prescription drug program. As with Medicare Advantage, it is mainly operated by private insurers. According to the MedPAC report, premiums for drug prescription insurance increased by nearly 25% in 2009 compared with 2008. The increase is 10 times larger compared with 2007 figures.

"The rapid rise in Part D premiums, drop in the number of low-cost options, and discriminatory cost-sharing schemes designed to cherry-pick healthy patients all cast serious doubt on the ability of the private market to operate without competition from a public health insurance option to control costs and provide stability for beneficiaries," said subcommittee chair Rep. Pete Stark (D-CA), who also called Part D a "mess."

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