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Medical Costs

November 04, 1987

To justify the exorbitant 38.5% increase for Part B Medicare premiums, as mentioned in your editorial, the Health Care Financing Administration is ascribing increased costs to physicians for, presumably, "expanded utilization of tests and procedures." Fiddlesticks. A scrutiny of the facts reveal that the increases are largely due to the Medicare administration itself.

The editorial also mentions that the Administration "is moving ahead with new strategies to try to get better control over Medicare expenditures for physicians by expanding PPS (Prospective Payment Systems) and DRGs (Diagnostic Related Groups)." This effort will not solve the problems of cost control.

According to a recent report in the Journal of the American Medical Assn. based on a study of hip fractures patients in a Minneapolis hospital of cases treated before the introduction of PPS and DRGs--and afterwards--the authors calculated that, instead of saving money, the annual cost for this one illness alone will increase by $100 million because of the necessity of increased nursing care.

Additionally, an article regarding DRGs in the L.A. Times (June 2, 1986), cited a report by Richard P. Kusserow, inspector general of the U.S. Department of Health and Human Services, which stated, "More than 200 hospitals earned more than $3 million each in profits on Medicare services in 1984, including one California hospital that made $22 million in profits on $55 million in Medicare revenues. The average hospital profit was 15%, about triple the average profit margin for all patients in recent years."

CARL M. LEVIN

Los Angeles

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