productivity. from 1984 to 1991, the yearly change in fees was determined by legislation. this was done because physician fees were rising faster than projected. the omnibus budget reconciliation act of 1989 made several changes to physician payments under medicare. firstly, it introduced the medicare fee schedule, which took effect in 1992. secondly, it limited the amount medicare non-providers could balance bill medicare beneficiaries. thirdly, it introduced the medicare volume performance standards (mvps) as a way to control costs. on january 1, 1992, medicare introduced the medicare fee schedule (mfs), a list of about 7,000 services that can be billed for. each service is priced within the resource-based relative value scale (rbrvs) with three relative value units (rvus) values largely determining the price. the three rvus for a procedure are each geographically weighted and the weighted rvu value is multiplied by a global conversion factor (cf), yielding a price in dollars. the rvus themselves are largely decided by a private group of 29 (mostly specialist) physicians—the american medical association's specialty society relative value scale update committee (ruc). from 1992 to 1997, adjustments to physician payments were adjusted using the mei and the mvps, which essentially tried to compensate for the increasing volume of services provided by physicians by decreasing their reimbursement per service. in 1998, congress replaced the vps with the sustainable growth rate (sgr). this was done because of highly variable payment rates under the mvps. the sgr attempts to control spending by setting yearly and cumulative spending targets. if actual spending for a given year exceeds the spending target for that year, reimbursement rates are adjusted downward by decreasing the conversion factor (cf) for rbrvs rvus. in 2002, payment rates were cut by 4.8%. in 2003, payment rates were scheduled to be reduced by 4.4%. however, congress boosted the cumulative sgr target in the consolidated appropriation resolution of 2003 (p.l. 108–7), allowing payments for physician services to rise 1.6%. in 2004 and 2005, payment rates were again scheduled to be reduced. the medicare modernization act (p.l. 108–173) increased payments by 1.5% for those two years. in 2006, the sgr mechanism was scheduled to decrease physician payments by 4.4%. (this number results from a 7% decrease in physician payments times a 2.8% inflation adjustment increase.) congress overrode this decrease in the deficit reduction act (p.l. 109–362), and held physician payments in 2006 at their 2005 levels. similarly, another congressional act held 2007 payments at their 2006 levels, and hr 6331 held 2008 physician payments to their 2007 levels, and provided for a 1.1% increase in physician payments in 2009. without further continuing congressional intervention, the sgr is expected to decrease physician payments from 25% to 35% over the next several years. mfs has been criticized for not paying doctors enough because of the low conversion factor. by adjustments to the mfs conversion factor, it is possible to make global adjustments in payments to all doctors. the sgr was the subject of possible reform legislation again in 2014. on march 14, 2014, the united states house of representatives passed the sgr repeal and medicare provider payment modernization act of 2014 (h.r. 4015; 113th congress), a bill that would have replaced the (sgr) formula with new systems for establishing those payment rates. however, the bill would pay for these changes by delaying the affordable care act's individual mandate requirement, a proposal that was very unpopular with democrats. the sgr was expected to cause medicare reimbursement cuts of 24 percent on april 1, 2014, if a solution to reform or delay the sgr was not found. this led to another bill, the protecting access to medicare act of 2014 (h.r. 4302; 113th congress), which would delay those cuts until march 2015. this bill was also controversial. the american medical association and other medical groups opposed it, asking congress to provide a permanent solution instead of just another delay. the sgr process was replaced by new rules as of the passage of macra in 2015. provider participation there are two ways for providers to be reimbursed in medicare. "participating" providers accept "assignment", which means that they accept medicare's approved rate for their services as payment (typically 80% from medicare and 20% from the beneficiary). some non-participating doctors do not take assignment, but they also treat medicare enrollees and are authorized to balance bills no more than a small fixed amount above medicare's approved rate. a minority of doctors are "private contractors" from a medicare perspective, which means they opt out of medicare and refuse to accept medicare payments altogether. these doctors are required to inform patients that they will be liable for the full cost of their services out-of-pocket, often in advance of treatment. while the majority of providers accept medicare assignments, (97 percent for some specialties), and most physicians still accept at least some new medicare patients, that number is in decline. while 80% of physicians in the texas medical association accepted new medicare patients in 2000, only 60% were doing so by 2012. a study published in 2012 concluded that the centers for medicare and medicaid services (cms) relies on the recommendations of an american medical association advisory panel. the study led by dr. miriam j. laugesen, of columbia mailman school of public health, and colleagues at ucla and the university of illinois, shows that for services provided between 1994 and 2010, cms agreed with 87.4% of the recommendations of the committee, known as ruc or the relative value update committee. office medication reimbursement chemotherapy and other medications dispensed in a physician's office are reimbursed according to the average sales price (asp), a number computed by taking the total dollar sales of a drug as the numerator and the number of units sold nationwide as the denominator. the current reimbursement formula is known as "asp+6" since it reimburses physicians at 106% of the asp of drugs. pharmaceutical company discounts and rebates are included in the calculation of asp, and tend to reduce it. in addition, medicare pays 80% of asp+6, which is the equivalent of 84.8% of the actual average cost of the drug. some patients have supplemental insurance or can afford the co-pay. large numbers do not. this leaves the payment to physicians for most of the drugs in an "underwater" state. asp+6 superseded average wholesale price in 2005, after a 2003 front-page new york times article drew attention to the inaccuracies of average wholesale price calculations. this procedure is scheduled to change dramatically in 2017 under a cms proposal that will likely be finalized in october 2016. medicare 10 percent incentive payments "physicians in geographic health professional shortage areas (hpsas) and physician scarcity areas (psas) can receive incentive payments from medicare. payments are made on a quarterly basis, rather than claim-by-claim, and are handled by each area's medicare carrier." enrollment generally, if an individual already receives social security payments, at age 65 the individual becomes automatically enrolled in medicare part a (hospital insurance) and medicare part b (medical insurance). if the individual chooses not to enroll in part b (typically because the individual is still working and receiving employer insurance), then the individual must proactively opt out of it when receiving the automatic enrollment package. delay in enrollment in part b carries no penalty if the individual has other insurance (e.g., the employment situation noted above), but may be penalized under other circumstances. an individual who does not receive social security benefits upon turning 65 must sign up for medicare if they want it. penalties may apply if the individual chooses not to enroll at age 65 and does not have other insurance. part a late enrollment penalty if an individual is not eligible for premium-free part a, and they do not buy a premium-based part a when they are first eligible, the monthly premium may go up 10%. the individual must pay the higher premium for twice the number of years that they could have had part a, but did not sign up. for example, if they were eligible for part a for two years but did not sign up, they must pay the higher premium for four years. usually, individuals do not have to pay a penalty if they meet certain conditions that allow them to sign up for part a during a special enrollment period. part b late enrollment penalty if an individual does not sign up for part b when they are first eligible, they may have to pay a late enrollment penalty for as long as they have medicare. their monthly premium for part b may go up 10% for each full 12-month period that they could have had part b, but did not sign up for it. usually, they do not pay a late enrollment penalty if they meet certain conditions that allow them to sign up for part b during a special enrollment period. comparison with private insurance medicare differs from private insurance available to working americans in that it is a social insurance program. social insurance programs provide statutorily guaranteed benefits to the entire population (under certain circumstances, such as old age or unemployment). these benefits are financed in significant part through universal taxes. in effect, medicare is a mechanism by which the state takes a portion of its citizens' resources to provide health and financial security to its citizens in old age or in case of disability, helping them cope with the cost of health care. in its universality, medicare differs substantially from private insurers, which decide whom to cover and what benefits to offer to manage their risk pools and ensure that their costs do not exceed premiums. because the federal government is legally obligated to provide medicare benefits to older and some disabled americans, it cannot cut costs by restricting eligibility or benefits, except by going through a difficult legislative process, or by revising its interpretation of medical necessity. by statute, medicare may only pay for items and services that are "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member", unless there is another statutory authorization for payment. cutting costs by cutting benefits is difficult, but the program can also achieve substantial economies of scale in the prices it pays for health care and administrative expenses—and, as a result, private insurers' costs have grown almost 60% more than medicare's since 1970. medicare's cost growth is now the same as gdp growth and expected to stay well below private insurance's for the next decade. because medicare offers statutorily determined benefits, its coverage policies and payment rates are publicly known, and all enrollees are entitled to the same coverage. in the private insurance market, plans can be tailored to offer different benefits to different customers, enabling individuals to reduce coverage costs while assuming risks for care that is not covered. insurers, however, have far fewer disclosure requirements than medicare, and studies show that customers in the private sector can find it difficult to know what their policy covers, and at what cost. moreover, since medicare collects data about utilization and costs for its enrollees—data that private insurers treat as trade secrets—it gives researchers key information about health care system performance. medicare also has an important role in driving changes in the entire health care system. because medicare pays for a huge share of health care in every region of the country, it has a great deal of power to set delivery and payment policies. for example, medicare promoted the adaptation of prospective payments based on drg's, which prevents unscrupulous providers from setting their own exorbitant prices. meanwhile, the patient protection and affordable care act has given medicare the mandate to promote cost-containment throughout the health care system, for example, by promoting the creation of accountable care organizations or by replacing fee-for-service payments with bundled payments. costs and funding challenges medicare and medicaid spending as % gdp (2013) medicare spending as a percent of gdp medicare expenses and revenue over the long-term, medicare faces significant financial challenges because of rising overall health care costs, increasing enrollment as the population ages, and a decreasing ratio of workers to enrollees. total medicare spending is projected to increase from $523 billion in 2010 to around $900 billion by 2020. from 2010 to 2030, medicare enrollment is projected to increase