Vladek identified two main problems with the current way physicians are paid by Medicare. First,
Medicare is captive to an arbitrary, if elegantly conceived, formula for total payments to physicians — the sustainable growth rate (SGR). In the alternate reality of the Congressional budget process, the SGR will reduce Medicare's physician payments, which already trail those from private insurers, as far into the future as the eye can see.
there is widespread consensus that the relative fees in the current system are a significant cause of the growing imbalance in supply and utilization between primary care and specialty services in the U.S. health care system. That imbalance, in turn, is widely perceived as a major cause of both excessive costs and inadequate quality of care. This is not just a Medicare problem: the Medicare Resource-Based Relative Value Scale is used by most private insurers to set relative prices for physicians.
Vladek expanded on the second point as follows
the basic mechanics of the Medicare Physician Fee Schedule, which was supposed to change physician payment to increase rewards for primary care services at the expense of procedural and interventional services, appears to have gone totally off track. For various reasons, the fee schedule, which originally did increase the prices of evaluation and management services relative to those of surgery or invasive procedures, turned in the other direction through the process of annual updating of relative value units. Surgeons, radiologists, and some medical specialists are now paid two to three times as much per hour as providers of cognitive services, which is about where we began 20 years ago; this was the situation that the fee schedule was supposed to fix.
The question of the relative virtues of primary versus specialty care can be debated ad nauseam, but in other wealthy countries that serve their populations at least as well as we do, the ratio of primary care physicians to specialists is much higher than in the United States, and the gap in compensation is much smaller or the poles even reversed. Young physicians, burdened by increasing educational debts, may well choose a career path on the basis of a major difference in compensation, especially when the better-compensated positions require less ongoing responsibility for patients and offer better working hours.
This is about all that Vladek wrote about how the imbalance between how Medicare pays for primary care and other "cognitive services," and for procedures came about. Vladek, and many others have argued that this imbalance has lead to strong financial incentives that have been slowly destroying primary care, and strong incentives that have lead to the use of too many procedures, both strong drivers of rising costs in the most expensive health care system in the world.
Vladek noted vaguely that "through various reasons," the incentives were imbalanced by "the process of annual updating of relative value units."
However, as we have discussed in several blog posts, a lot more is known about how this process got "totally off track."
In fact, in 2007, an article by Bodenheimer et al in the Annals of Internal Medicine explained the problems in considerably more detail.(2) As we wrote then, Its main points included
- Proceduralists are often able to learn how to do their procedures more quickly, and thus increase the volume of procedures done, while office and hospital visits can only be sped up so much.
- The process used to update the RBRVS system is biased towards procedures for three main reasons: 1. "specialty society influence in proposing RVU [relative value unit] increases," 2. the specialist-heavy RUC [Relative Value Scale Update Committee] membership," and 3. "the desire of RUC specialists to avoid increases in evaluation and management [that is, cognitive, or non-procedural] RVUs."
- Medicare now uses a formula to limit increases in overall spending. The use of this formula leads to across the board cuts in all reimbursements. Since cognitive services reimbursements were never high to begin with, and have rarely been individually increased, these cuts tend to have disproportionate decreases.
- Private insurers and managed care organizations tend to follow Medicare's lead in their reimbursement procedures, but tend to tilt the playing field even more in favor of procedures versus cognitive services. Several studies showed that such payers paid more for procedures than did Medicare, but about the same for office and hospital visits.
To expand on the penultimate point, the current page on the AMA web-site that describes the RUC only lists its members in terms of their specialties and organizational affiliation. Their names do not appear. A response to a previous post by me on the subject by the then Chair and Chair-Elect of the RUC suggested that the RUC membership is not quite secret. They stated that "a list of the individual members of the RUC is published in the AMA publication, Medicare RBRVS 2009: The Physicians Guide." This publication is available from the AMA here for a mere $71.95. However, the book is not on the web, or in my local or university library, and I have no other way to easily access it. Thus, the RUC membership as at best relatively opaque.
To expand on the ultimate point, as Goodson(3) noted, RUC "meetings are closed to outside observers except by invitation of the chair." Furthermore, he stated, "proceedings are proprietary and therefore not publicly available for review."
The fog surrounding the operations of the RUC seems to have affected many who write about. We have posted (here, here, and here) about how previous publications about problems with incentives provided to physicians seemed to have avoided even mentioning the RUC. In 2010, post the US recent attempt at health care reform, the RUC seems to remain the great unmentionable. Even the leading US medical journal seems reluctant to even print its name.
Thus, as we noted before, however, the mysteries about it remain:
- How did the government come to fix the payments physicians receive? Government price-fixing has not been popular in the US, yet this has caused no outcry.
- Why is the process by which they are fixed allowed to be so opaque and unaccountable? Why are there no public hearings on the updates, and why is there no input from practicing physicians or organizations other than those related to the RUC?
- How did the RUC become de facto in charge of this process?
- Why does the AMA keep the membership on the RUC so opaque, and give no input into the RUC process to its general membership?
- Why is the RUC membership so dominated by procedural specialists? Why were primary care physicians, who made up at least a sizable minority of physicians when the update process was started, not represented according to their numbers?
- Why has there been so little discussion of the RUC and its responsibility for an extremely expensive health care system dominated by high-technology, expensive, risky and invasive procedures?
1. Vladek B. Fixing Medicare's physician payment system. N Engl J Med 2010; 362:1955-1957. (Link here.)
2. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. (Link here.)
3. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. (Link here.)