for a long time on the phone just to get a better handle on what was going on.

Within the last week, a whole group of doctors in the second largest city in Iowa-there was a big article in the newspaper—just opted out of the Medicare system. They are not going to take it anymore. And at the center of this is the paperwork burden, everything that they have to fill out, I guess some of the fines that are assessed or something like that if they make a mistake. And what is happening then is that the people who are on Medicare are the losers on this.

I am wondering if you are looking into this? I know this is not just isolated with my State. It has to be all over. What is happening out there? Are you looking at this?

Dr. GINSBURG. Yes; we are devoting a lot of effort to looking at this with Medicare physician payment reform, which will result in higher payments for services in some areas and lower payments for services in other areas. We think it is critical to monitor access by beneficiaries to Medicare services under these reforms.

We have convened a panel on access to advise us on this, and we have very ambitious plans for using some of the new databases such as the common working file to monitor access under the system and report to Congress about where and to what extent problems develop.

Fortunately, the Health Care Financing Administration has funded the current beneficiary survey which also will help in our efforts to monitor access. But I think it is very critical, at this time of transition to a new payment system, to do this so that we can make corrections if problems do crop up.

Senator HARKIN. Let me just understand this. Are you going to be issuing any kind of findings in this regard or statements or something like that with regard to the impact of the regulations on doctors who are providing health service to Medicare recipients and the paperwork burden and that kind of thing?

Dr. GINSBURG. Actually what we have been asked to do focuses not so much on paperwork issues, but on the effects on access of the implementation of the Medicare fee schedule, the volume performance standards, and limits on charges.

I know that paperwork is a problem. I think there are some hopeful signs, with the Health Care Financing Administration starting to grapple with some of the problems. For example, there is a demonstration project that has just been launched to publish in advance and show physicians in certain States the screens that are used to trigger review of their claims. This has a lot of potential to reduce the hassle factor for physicians. I think it is very critical in the Medicare Program that we try to make the program as hassle-free for physicians as possible because if we don't, the people for whom the program was designed won't benefit from it.

Dr. LEROY. A couple other things I can mention that speak to this issue are the Commission's consideration of electronic claims submission which facilitates the interaction between the physicians and the carriers. It gives physicians more guidance in terms of how to provide information to the carriers, and it is much easier to correct any misinformation so there is not so much back and forth and uncertainty.

The Commission also has initiated some work on profiling of physician practice patterns. We have a chapter in our report, which is due out next week, that begins to look at profiling. We think it has a lot of potential for less intrusive ways of reviewing physicians' practice patterns where you do not have to look at and question every individual claim. Again, the more that these kinds of techniques are used, the less intrusive and bothersome the system can become. So, we have a number of different projects that are looking at this from different angles.

Senator HARKIN. Second, under our physician payment system, physicians are given incentives to locate their practice in urban areas. In fact, America is the only country whose payment system gives incentives to doctors for establishing their practices in areas that have enough doctors already. Data on international health care systems indicate that doctors receive a strong psychic benefit from working in urban areas. Now, it is really hard to believe that American doctors are so different in this regard that they need monetary incentives to locate in cities.

In your opinion, do we need to offer physicians incentives to practice in cities, or how about rural areas?

Dr. GINSBURG. No; physicians certainly don't need incentives to practice in cities. Our current payment system was really never the result of a deliberate policy decision, but by being based on what physicians charge in areas, a distortion developed over time of paying too much in urban areas relative to rural areas.

I am pleased to say that the payment reform will redress some of this difference. Payment reform will base payment not on the historical charges, but payment will vary on the basis of a geographic adjustment factor that reflects differences in practice costs as best as they can be measured so that the difference in payment between urban and rural areas will shrink. Still, on average, the urban payments will be higher, but now the difference will be based on data and analysis.

Now, that is not the end of the story because the country probably should be giving additional incentives to physicians to practice in rural areas, really in both urban and rural areas where physicians are in short supply. I am pleased that Congress enacted the Medicare bonus payment for physicians in health professional shortage areas. It did that in 1987, and then it expanded the size of the bonus in 1989. This was one of the earliest recommendations of the Commission. So, at this point, the payment is 10 percent higher in health professional shortage areas.

Senator HARKIN. Dr. Ginsburg, thank you very much.

I recognize Senator Stevens.

Senator STEVENS. Thank you very much. I don't have any questions.

QUESTIONS SUBMITTED BY THE SUBCOMMITTEE

Senator HARKIN. We have some other questions which we will submit to you in writing for your answers. Thank you very much. I appreciate it.

[The following questions were not asked at the hearing, but were submitted to the Commission for response subsequent to the hearing:]

QUESTIONS SUBMITTED BY THE SUBCOMMITTEE

Physician Location Choices

Senator Harkin: Dr. Ginsburg, I really am concerned about the way we continue to think about factors that influence doctors in their choice of where to start a practice.

I think we need to revise our current philosophy that assumes physicians simply consider costs when making decisions concerning where to locate their practices.

Under our physician payment system, physicians are given incentives to locate their practice in urban areas. In fact, America is the only country whose payment system gives incentives to doctors for establishing their practices in areas that have enough doctors already. Data on international health care systems indicates that doctors receive a strong "psychic" benefit from working in urban areas--it really is hard to believe that American doctors are so different in this regard that they need monetary incentives to locate in cities.

Doctor, in your opinion, do we need to offer physicians incentives to practice in cities?

How about in rural areas?

Dr. Ginsburg: [Asked and answered during hearing] No, physicians certainly don't need incentives to practice in cities. Our current payment system was really never the result of a deliberate policy decision, but by being based on what physicians charge in areas, a distortion developed over time of paying too much in urban areas relative to rural areas.

I am pleased to say, Senator Harkin, that the payment reform will redress some of this difference. Payment reform will base payment not on the historical charges, but payment will vary on the basis of a geographic adjustment factor that reflects differences in practice costs as best as they can be measured so that the difference in

payment between urban and rural areas will shrink. Still, on average, the urban payments will be higher, but now the difference will be based on data and analysis.

Now, that is not the end of the story because the country probably should be giving additional incentives to physicians to practice in rural areas, really in both urban and rural areas where physicians are in short supply. I am pleased that Congress enacted the Medicare bonus payment for physicians in health professional shortage areas. It did that in 1987, and then it expanded the size of the bonus in 1989. This was one of the earliest recommendations of the Commission. So, at this point, the payment is 10 percent higher in health professional shortage areas.

Phase-in of Physician Payment System

Senator Harkin: Dr. Ginsburg, the new physician payment system, which hikes fees for primary care and cuts them for various surgeries, was originally scheduled to be phased in over four years. It now seems that approximately 57% of the total shift in fees will have occurred by January 1992, due to the budget resolutions passed by Congress over the last two years.

The Administration currently favors the idea of speeding up implementation of the new physician payment system, based on assurances by the Health Care Financing Administration and Medicare contractors that they can handle the system changes immediately.

Has PPRC evaluated the relative impacts of these two proposals?

When will the Commission be able to provide an analysis of this issue to Congress?

Dr. Ginsburg: The Commission discussed the idea of speeding up the transition to the new payment system at its last meeting but decided not to make such a recommendation. The reasons for spreading the implementation of the payment reform over five years that led the Congress to write such a policy are still present.

The payment reform will cause large reductions in payments for certain procedures, especially in geographic areas in which prices are currently high. A transition not only gives physicians an opportunity to adjust to lower payments but is an important protection of beneficiary access. Private payers have shown substantial interest in mimicking Medicare's relative values. To the degree that they follow Medicare's lead, large differences between what Medicare pays and what others pay for a particular service will be avoided. By having a transition, private payers are given time to make changes. This will minimize differences with Medicare at any point in time and limit risks to access by Medicare beneficiaries.

While the reaction of some to the Commission's finding that more than half of the changes in payments will have been completed by 1992 has been to advocate shortening or eliminating the rest of the transition in order to reduce administrative complexity, the reaction of others has been one of alarm that the transition is progressing more rapidly than they had envisioned. In my estimation, the administrative differences are quite minor when compared to the policy differences among different speeds of transition and the latter ought to dominate decisions on the speed of the transition.

The Commission has developed extensive plans to monitor access under the Medicare Fee Schedule. If it finds that the fee schedule implementation is proceeding smoothly, it then will consider whether a recommendation to speed up the last stages of the transition is in order.

Nonphysician Providers

Senator Harkin: Members of this Subcommittee have been concerned for many years about the proper Medicare fee schedule for nonphysician providers, such as nurse practitioners and physician assistants. Certainly, we know that there is a wealth of talented professionals out there providing quality primary care services to individuals; and these services are the kind of front-line preventive care we need to expand and promote.