Primary Care Represents Less Than 5% of Medicare Spending

Primary care spending as a percentage of total spending in the Medicare program is low, according to a RAND study.

Primary care services make up a small percentage of total Medicare fee-for-service spending, ranging between just over 2% to nearly 5%, according to a new RAND study released Monday.

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 services spending by beneficiary under the narrow definition totalled $308.32, while narrow primary care services rendered under the broad definition reached $387.79. For all professional services under the narrow definition, beneficiaries spent $550.62 while the amount spent under the broad definition totalled $708.23.

Primary care services have long been defined by "higher quality, better outcomes and lower costs," according to the report, though fluctuations between the percentage that primary care spending represents depend on whether narrow or expansive definitions are applied.

RAND researchers stress the study's findings provide a set of reference points that could be beneficial for hospital administrators looking to benchmark and might also contribute to "policy debates about investment in primary care."

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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 how primary care spending can be measured 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 of them are 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 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 treatment from specialists to monitor more serious or chronic medical conditions.

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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 the providers in those states are mostly conducting comprehensive care, including a combination of other services beyond the definition of primary care.

Since primary care spending in the Medicare program 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 taking care of their patient populations," Friedberg said. "T hat'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."