The Medical Education Futures Study Blog

The Medicare Payment Advisory Committee’s (MedPAC) March 2009 Report to Congress repeats its previous recommendation to Congress to:

1. Establish a budget-neutral primary care adjustment to the physician fee schedule
2. Direct the Secretary to adjust the calculation for the relative value units for expensive imaging machines in order to redistribute payments to other physician services.

Both are attempts to address Medicare physician fee schedule distortions which promote specialty care at the expense of primary care.

Since 1992, Medicare has relied on the Resource-Based Relative Value Scale (RBRVS) to determine the physician fee schedule.  Every physician service is assigned a relative value which is then multiplied by a conversion factor to determine the amount of payment.  The Relative Value Update Committee (RUC) advises the Centers for Medicare and Medicaid Services (CMS) on the work component of the total relative value of each new service and also assists with revaluing the work component of existing services. CMS itself is responsible for making decisions that determine the practice expense component of the total value of each of the 7000 services that CMS reimburses.

The RUC is sponsored by the American Medical Association and largely made up of members assigned by specialty societies.  Annually, CMS accepts more than 90% of RUC’s recommendations as part of a public rule-making process.  Fee schedule distortions which have emerged then are based on a combination of mis-estimates of work provided by the RUC and flawed assumptions about practice expenses that CMS has made. One might ask the question after 17 years of the Medicare Fee Schedule based on RBRVS why CMS still relies on estimates of components of the relative value units rather than empirical measurement. These empirical measurements would be available not only from other governmental units, such as the VA system, but also from health plans and providers. For example, why should Medicare pay on the basis of self-interested specialty estimates of the time it takes to perform a surgical procedure rather than actual “skin-to-skin” times and associated pre- and post-operative times available from actual OR logs.

Private insurers increasingly rely on Medicare’s RBRVS values in setting their own fee schedules. They have a direct stake in wanting the relative prices in the Medicare fee schedule to accurately reflect the real world – and, indeed, commonly complain that the Medicare Fee Schedule seems tilted in favor of technical and procedural services, while undervaluing primary care and evaluation and management services.  Yet, the private payers have been quiet about these perceived distortions, even as they rely on the Medicare relativities in their own negotiations with physicians.

MedPAC recently has taken up the issue of fee schedule distortions and there are signs that Congress is beginning to understand the problem.  The fact is that the Medicare Physician Fee Schedule is subject to notice and comment rule making, according to the Administrative Procedures Act, which guarantees that the public at large can have input into the rule making. As obvious stakeholders, purchasers’ and commercial insurers’ general and technical views would have to be given important consideration by CMS when reviewing RUC recommendations on work values and in its own estimates of practice expenses. The situation is not that of a single payer, imposing its bureaucratic will on the country — that then private purchasers and plans are stuck with.

The RUC is powerful but that is partly because other stakeholders have allowed it to be,   Thus far, the purchaser and plan community have appeared to opt out of the rule-making process, allowing the fee schedule to become overly responsive to specialist and corporate vendor interests.  CMS can’t easily reject RUC recommendations if no one else in the public — especially other affected stakeholders — don’t provide comments that reflect different perspectives and analyses from what the RUC process produces.

Bob Berenson, MD, Senior Fellow, The Urban Institute

The total number of PGY-1 residency positions offered and filled increased again this year, with 400 (1.9%) more PGY-1 positions filled.  However, despite a promising increase in family medicine position filled last year, the number of positions offered and filled is down again this year - 100 fewer positions were offered and there were 75 fewer positions filled (Figure).

Figure. Results of the NRMP, 1997-2009, for Family Medicine Positions Offered and Filled (Source: AAFP)

The number of internal medicine and pediatric positions offered and filled rose incrementally, but increases in these PGY-1 positions will not necessarily equate to more primary care as more and more of these residents are choosing to further specialize after their initial “primary care” residencies.

Congress is increasingly recognizing the physician workforce and medical student specialty choices as critical components to developing a health care system in the U.S. that is equitable, accessible and cost-effective.  But the 2009 Match is another step in the wrong direction and hopefully it sends a message.  The time to act is now.