Fast Facts

Medicare Part B's Physician Fee Schedule covers payments for services such as office visits. Some have noted that payment rates may not fully account for the unique local characteristics of Alaska, Hawaii, and the U.S. territories.

In 2019, payment rates for selected services in Alaska were considerably higher than national rates (e.g., 39% higher for certain ER visits), while most payment rates in Hawaii and the territories were slightly higher.

These services were used less in these areas than the national average, which may be attributable to differences in population demographics and access to services.

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Highlights

What GAO Found

Using the most recently available Medicare data, GAO found that Medicare Part B fee-for-service (FFS) populations in Alaska, Hawaii, and the U.S. territories—American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), Guam, Puerto Rico, and the U.S. Virgin Islands—varied considerably in size, demographic, and other key characteristics. For example, the number of beneficiaries enrolled in Part B FFS at any time in 2019 ranged from 2,091 in CNMI to 122,480 in Hawaii. In terms of Medicare eligibility, most Part B FFS beneficiaries nationally were eligible because they were age 65 or older (85.1 percent), followed by beneficiaries eligible due to a disability (14.6 percent), and beneficiaries with end stage renal disease (ESRD; 0.3 percent). However, the proportions varied across Alaska, Hawaii, and the territories. For example, the proportion of Part B FFS beneficiaries eligible

  • because they were age 65 or older ranged from 71.9 percent in American Samoa to 92.4 percent in the U.S. Virgin Islands;
  • due to a disability ranged from just over half the national rate in the U.S. Virgin Islands (7.4 percent) to 26.3 percent in American Samoa; and
  • due to ESRD ranged from 0.2 percent in Alaska to 2.5 percent in Guam.

GAO also analyzed Medicare payment rates—which are adjusted to account for local differences in the costs of providing care—for 12 selected services that each accounted for at least $950 million in Medicare expenditures in 2019. GAO found that Medicare payment rates (that reflect local adjustments) for selected services were higher in Alaska, Hawaii, and the territories compared to national rates (which do not reflect local adjustments). However, utilization of and expenditures for these services were generally lower. Specifically, payment rates in Alaska were considerably higher than the national payment rates, whereas payment rates in Hawaii and the territories were largely somewhat higher than the national payment rates for services examined. For example, payment rates for selected services in Alaska ranged from about 26 percent higher for an eye exam and treatment to about 39 percent higher for an emergency department visit. For Puerto Rico and the U.S. Virgin Islands, payment rates were less than 1 percent greater than the national payment amount.

GAO analysis of 2019 Medicare Part B FFS claims data shows that utilization and expenditures for the 12 selected services in its review were generally lower in Alaska, Hawaii, and the territories when compared to national rates. For example,

  • Alaska, Hawaii, and all U.S. territories had lower per beneficiary utilization of outpatient evaluation and management services under the Physician Fee Schedule than national per beneficiary utilization in 2019. Per beneficiary use for these services ranged from 1.1 services in American Samoa to 5.6 services in Hawaii, less than the national rate of 6.1 services.
  • Partly due to lower per beneficiary utilization, per beneficiary expenditures for all selected services were also lower in Alaska, Hawaii, and the territories compared to national Part B FFS per beneficiary expenditures in 2019. Specifically, they ranged from about $183 in American Samoa to about $627 in Alaska, compared with national per beneficiary expenditures of about $735.

Why GAO Did This Study

Certain state and territory stakeholders have raised questions about payment rates under the Medicare Physician Fee Schedule for Alaska, Hawaii, and the territories. They noted that the rates might not take into account unique characteristics which may affect the delivery of care. The Centers for Medicare & Medicaid Services (CMS) determines payment rates for services covered under the Medicare Physician Fee Schedule based on estimates that the agency assigns to each service. These estimates reflect the time and intensity of provider work, practice expenses (e.g., cost of non-provider labor or office rent), and malpractice premiums needed to provide one service relative to other services. CMS separately adjusts the estimates to account for a provider’s geographic location, which affects the cost of providing care.

House Report 116-62 includes a provision for GAO to examine Medicare funding for Alaska, Hawaii, and the U.S. territories. This report describes 1) demographic and other key characteristics of Medicare Part B FFS beneficiaries in Alaska, Hawaii, and the U.S territories; and 2) payment rates, utilization, and expenditures under the Physician Fee Schedule across these states and territories.

GAO analyzed Medicare data from 2019—the most recent year of data available at the time of its review—to describe Medicare beneficiaries in Alaska, Hawaii, and the territories. GAO used the Medicare Physician Fee Schedule Search Tool to determine payment rates for the 12 selected services based on Medicare spending in 2019 and compared them to the national payment amount. GAO also analyzed Medicare claims data from 2019 to determine per beneficiary utilization and expenditures for Alaska, Hawaii, and the territories. GAO compared them to national Medicare per beneficiary utilization and expenditures. To supplement this work, GAO obtained information from health officials in the states and territories and examined key documents.

For more information, contact Jessica Farb at (202) 512-7114 or FarbJ@gao.gov.

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