According to a new RAND study released Monday, primary care services make up a small percentage of Medicare beneficiaries’ spending, ranging between just over 2% and nearly 5%.
The study analyzed spending by 16 million Medicare beneficiaries with fee-for-service coverage under Parts A and B, along with Part D prescription coverage, during 2015.
Narrow primary care spending by a beneficiary under the narrow definition totaled $308.32, while services rendered under the broad definition reached $387.79. For all professional services under the narrow definition, beneficiaries spent $550.62, while the amount paid under the broad definition totaled $708.23.
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According to the report, primary care services have long been defined by “higher quality, better outcomes, and lower costs,” though fluctuations in the percentage that primary care spending represents depends on whether narrow or expansive definitions are applied.
RAND researchers stress that the study’s findings provide a set of reference points that could benefit hospital administrators looking to benchmark while also contributing to “policy debates about investment in primary care.”
Mark W. Friedberg, one of the study’s authors, told HealthLeaders that health system CFOs would also benefit from reviewing the Millbank Memorial Fund report released last October to understand the technical aspects of measuring primary care spending within a health system using claims data.
“There are multiple ways of defining primary care, both based on provider training background and the type of service they’re providing,” Friedberg said. “Depending on how you set the dials on those assumptions, you could get different Medicare spending figures. Of course, none is high; in the Medicare population, you’re dealing with primary care spending under 5% of total spending, no matter how you set the dials.”
Friedberg added that another interesting finding from the report is that primary care spending represents a lower fraction of total spending as patients get older. While older cohorts spend more on primary care, they also spend much more on specialist treatment to monitor more serious or chronic medical conditions.
When reviewing the data, it’s clear that primary care spending varies geographically.
For narrow definitions of primary care, the lowest percentage of spending came from North Dakota at 1.59%, while Hawaii led the way with 3.19%. For expansive definitions, the lowest percentage came from the District of Columbia at 2.92%, while Iowa led the nation at 4.74%.
Friedberg said that the upper Midwest recorded low primary care spending using a narrow definition of services but was not low when the broader definition was applied. He said this means providers in those states mostly conduct comprehensive care, including a combination of other services beyond the definition of primary care.
Since primary care spending in the Medicare program is low, Friedberg recommends investing in primary care to provide them with additional capabilities.
“Maybe you want to give [primary care providers] another 10% or 20% on top of their current budgets for caring for their patient populations,” Friedberg said. “That’s not going to break the bank because the denominator for primary care is so low. You’re talking about adding less than half a percent to total Medicare spend if you do something like that.”
Jack O’Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.
