A Misguided Attempt to Change the Medicare Fee Schedule
Tuesday, April 12, 2011 at 02:04PM Medicare generally sets its fee schedule for physicians by following the advice of the RUC, a specialist-dominated panel of physicians within the AMA. This has led to some predictable problems – most notably, primary care physicians being paid much less than specialists. So it’s nice to see some proposals for reform. A particularly clever one is for primary care specialists to boycott the RUC, depriving it of legitimacy. If you like it, sign the petition here.
But the problem is that none of these proposals have any better method of determining physician fees. They want primary care physicians to make more money, but they don’t specify how much more, or how that amount should be determined. They just support more “transparency” or a more “diverse panel”.
Fundamentally, there are two ways to set physician fees. One is by convening a bunch of people – physicians, insurers, politicians, etc – and coming up with a payment method. Another is to let each physician charge as much as he can, let patients pay as much or as little as they can or would like to, and see what happens.
Currently, Medicare does it through the first method. All the reform proposals just want to tweak that method, hoping to come up with a political alliance that is more in their favor. None of them want to use the second method by, say, turning Medicare into a voucher system. But it’s not clear why the committee method is more favorable than the market method. If primary care physicians really are underpaid relative to the value they add, the latter method would surely raise their relative fees. But the result of the former method is unpredictable – it depends on who ends up winning the political battle.
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