Paying More for Primary Care: Can It Help Bend the Medicare Cost Curve?

The health reform law boosted Medicare fees for primary care ambulatory visits by 10 percent for five years starting in 2011. Using a simulation model with real-world parameters, we evaluate the effects of a permanent 10 percent increase in these fees. Our analysis shows the fee increase would increase primary care visits by 8.8 percent, and raise the overall cost of primary care visits by 17 percent. However, these increases would yield more than a sixfold annual return in lower Medicare costs for other services—mostly inpatient and postacute care—once the full effects on treatment patterns are realized. The net result would be a drop in Medicare costs of nearly 2 percent. These findings suggest that, under reasonable assumptions, promoting primary care can help bend the Medicare cost curve.