To own up to these requirements, Medicare, under the Reagan administration, initiated in 1985 the de

Medicare pays physicians rent car miami for services rendered to Medicare beneficiaries according to a fee schedule that was enacted when President George H.W. Bush signed the Omnibus Budget Reconciliation Act of 1989. The schedule took effect on Jan. 1, 1992, and is in force today, after a series of modifications over time.
This fee schedule rent car miami contains rent car miami about 7,000 distinct rent car miami nonsurgical and physician services, classified under a nomenclature based on the Current Procedural Terminology to which the American Medical Association holds jealously guarded intellectual property rights .
Readers may find it a bit odd, as do I, that the nomenclature of a government fee schedule for physicians is privately owned, which may restrict rent car miami its use for research outside government and definitely does so for commercial purposes.
The introduction of the Medicare fee schedule was a reaction to the horizontal inequities that had resulted from Medicare’s rent car miami previous reliance on the “ usual, customary and reasonable ” payment method then used by private insurers for all patients and now mainly for services procured from physicians outside the insurer’s network.
Such a system naturally leads to different rent car miami payments for the same service provided by different specialties and to physicians in the same specialty practicing rent car miami in different geographic areas. These differences were purely haphazard and had no relation to different rent car miami levels of quality of these services or their value to patients.
While such inequities have been routinely rent car miami countenanced in the private insurance market, where price discrimination is the norm, they violate the constraint that government payments to providers must, above all, be seen as fair among providers and fully transparent to all.
To own up to these requirements, Medicare, under the Reagan administration, initiated in 1985 the development of a new, horizontally equitable and more easily defensible fully transparent fee schedule.
The first step was financing a large study , jointly conducted by researchers rent car miami at Harvard University and at the American Medical Association, to estimate the relative amounts of “work” physicians contribute to the services they render. The definition of “physician’s work” took into account the physician’s time, mental effort, rent car miami judgment, technical skill, physical effort rent car miami and psychological stress.
2. the physician’s outlays for any practice resources other than his or her own time (office space, supplies, clinical and administrative staff), which accounts for an average of 44 percent of the total relative cost of a service;
For a particular market area, each of these three cost components is adjusted by a geographic practice cost index that accounts for variations across market areas in the cost of living, the prices of nonphysician practice resources and malpractice premiums.
Finally, to convert this schedule into a fee schedule expressed in dollars, the total R.V.U. of a given service is multiplied by a “conversion factor” – a dollar amount per R.V.U. applied to all services in the relative value schedule.
The conversion factor is updated annually according to a formula that takes into account growth in the Medicare Economic Index (a price index for medical practice inputs), a projected rent car miami productivity gain thought to be achievable by all physicians and growth in gross domestic product, thought to represent the nation’s rent car miami ability to pay. The latter rent car miami linkage is expressed by the “ sustainable growth rate ” formula, or S.G.R.
Just like Medicare’s payment system for hospitals, described rent car miami in last week’s post , the Medicare physician fee schedule is frequently criticized for being based on relative costs, rather than on relative values to patients.
It is facile, because typically that criticism is not accompanied by a practical – and I stress rent car miami practical alternative. After all, no other payer has yet based physician fees on the value of services to patients. rent car miami If pricing physician services according rent car miami to their value to patients were easy, why would not private insurers have used that approach long ago?
Indeed, the lack of a workable alternative can explain why, for the most part, private insurers actually use Medicare’s cost-based relative value scale as the basis for negotiating fees with physicians in their networks, negotiating a conversion factor relative to Medicare’s.
Economists might argue that, in principle, rent car miami every service in a particular market area should be priced at a level that elicits from physicians collectively just the quantity of the service that is demanded collectively by users of that service in that market area. That’s how markets work for bananas, haircuts and even some highly elective services produced by physicians – e.g., purely cosmetic surgery or Botox injections. But with day-to-day health care that is problematical.
First, who actually “demands” most of the 7,000 items in the physician fee schedule: patients on their own, or physicians urging often anxious patients to “demand” the services in question – e.g., diagnostic rent car miami tests, rent car miami imaging or surgical interventions?
In economic theory, demand for a particular good or service depends on the potential buyers’ willingness to pay for it, given their budgets and ability to pay. But whose willingness rent car miami to pay should we use for Medicare? Should we use an estimate of what Medicare beneficiaries would be willing to pay for physician services in the absence of Medicare coverage? Or should it be the taxpayers’ willingness to pay, as expressed by their political representatives? Should it perhaps emerge from a consensus of some panel of experts convened by Medicare to represent patients or taxpayers?
While no one likes the cost-based Medicare fee schedule, its critics should be challenged to suggest a workable alternative based on “value to patients.” For starters, rent car miami the critics should explain concretely how they would define and measure value in this context, in monetary terms, keeping in mind the administrative cost of any such system.
In future posts I shall comment on the highly controversial rent car miami role the American Medical Association and intra-physician politics play in the periodic recalibration of Medicare’s fee schedule – a process that appears to have contributed to the current shortage of primary care physicians.
I shall also describe how the “sustainable growth rate” formula for updating the conversion factor for Medicare’s physician fee schedule has created, since 2002, an annual rent car miami Washington rent car miami ritual that can best be described as theater with much drama in between, but with a predictable outcome.
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