Want to Price-Fix Medical Fees? Just Work It Out with the Government!

July 30, 2013
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DRbribeThe American Medical Association “recommends” the fees for all medical procedures. Action Alert!

Every three years, the American Medical Association—which, it should be noted, is a private trade association—convenes a special committee of doctors (all AMA members) called the RUC. This is shorthand for the Specialty Society Relative Value Scale Update Committee. This committee “recommends” (but really decides) how much Medicare should reimburse them and their colleagues for medical services and medical procedures. This is done by determining the “value” of a procedure based on an arbitrary (and, as we shall see, biased) methodology.

The triennial RUC meeting concludes with an anonymous vote on a list of “recommended values” for medical services, which is then sent to the Center for Medicare and Medicaid (CMS). Over the past twenty-five years, CMS has accepted about 90% of the RUC’s recommendations. And where Medicare goes, so goes the medical insurance industry.

This small group is, therefore, one of the most powerful committees in the country. And its business is done completely in secret.

In essence, this is a form of medical price-fixing that is being sanctioned—indeed, protected—by our government. Doctors are determining how much the government should pay them for their services, and there is no independent or objective body to oversee them. The meetings are closed to the public, and no documents from the meeting are ever released. In fact, all members, advisors, and consultants have to sign nondisclosure agreements with extremely harsh penalties; former members call them “draconian.” Not coincidently, pharmaceutical and device manufacturers are major funders of these meetings.

One problem with the methodology used, as the Washington Post points out, is that each procedure or service is assigned a dramatically skewed number of “procedure hours” intended to allow some specialists to fit anywhere from 16 to 50 procedure hours into a regular 8-hour day. They are thus able to receive between two and six times the amount of Medicare and insurance reimbursement permitted for any given outpatient surgical procedure. This way the rate can sound low when in fact it isn’t (wink, wink).

Since private insurance uses Medicare’s pricing as a baseline to determine their own reimbursement policies, anyone who uses insurance to pay for medical care is affected by all this. And of course Medicare is funded by taxpayers, so we’re paying both directly through our insurance and indirectly through our taxes.

The RUC is dominated by specialists. Primary care doctors make up 40% of physicians nationwide, but have only 14% of votes in the RUC. As a result, the RUC sets higher rates for specialty services, and lower rates for general services. At the meetings, most of the time is spent looking at specialty procedures, which change as technology advances, and little on “cognitive services” like primary care. This results, as one former RUC member put it, in “a hundred ways to bill for removing varicose veins, and only one way to bill for an intermediate office visit.” The RUC spends hours discussing the minutia of the price of a service (its value in the crudest sense), but not a single minute on whether a procedure actually benefits one’s patients or if there is a better and/or cheaper option available (its true value).

What this creates is a healthcare system dominated by specialists who decide prices for their own services—most of which you will only be told about after the fact, and many of which are unnecessary in the first place—together with a shocking shortage of primary care physicians. From an integrative medical perspective, the focus of the conventional medical establishment is just getting narrower and even less holistic than it used to be, because so little financial compensation is being given for office visits or the time it takes to create a solid doctor–patient relationships.

Why is this so important? It is projected that Medicare will be insolvent by 2026. Before then, if present trends continue, the cost of medicine will make the entire American economy insolvent. Already many companies are looking at ObamaCare as a way to offload  the employee medical expenses that keep rising relentlessly. Each dollar an employer pays for inflated medical costs is a dollar not available for an employee raise or a new hire. Price-fixing, and especially price-fixing by the AMA, will not get us out of the box we are presently in. Howard Dean, former governor of Vermont and Democratic presidential candidate, recently wrote an op ed noting how price fixing has never succeeded in controlling medical costs, not even in Vermont when tried, and that was price fixing by people other than doctors.

As we’ve discussed in the past, the AMA also creates and owns the billing codes used by Medicare and by every hospital, doctor, and practitioner who accepts insurance. This is another government sanctioned and protected monopoly. And of course these codes don’t include complementary or alternative medical (CAM) therapies. That’s because the AMA doesn’t represent integrative doctors, further marginalizing CAM treatments.

A bill has been introduced in the House which supposedly addresses these issues. It is being touted as “a fair transition away from today’s fee-for-service Medicare reimbursement system.” Sadly, it isn’t anything of the sort.

Under this new bill, Medicare would give doctors a 0.5% annual across-the-board payment increase for the next ten years, as well as an adjustment depending on how well they follow “quality measures and clinical practice improvement activities” as determined by their peers providing similar services. Those who meet the criteria will receive a 1% increase; those who don’t will receive no increase or even a 1% reduction, depending on their score.

This bill does nothing whatsoever to address the baseline of costs already set by the AMA’s RUC, and it will just give the AMA even more power to enforce its monopoly on medical payments. Doctors who fail to tow the AMA treatment line, in particular integrative doctors, will find it even harder to make a living.

Rep. Jim McDermott (D-WA) has introduced a somewhat better bill that calls for an expert panel to review the “recommended values” in the Medicare physician fee schedule. The panel would, in theory, have a diverse membership composed of experts who would not personally benefit from their recommendations. We will believe this when we see it. It looks like window dressing to us—and how long would it take for the AMA to regain total control of the process? Anyway, at this point it is unlikely the bill will be successful.

Action Alert! Contact your representative in the House and ask him or her to end the AMA monopoly on pricing within the Medicare system. Explain that the bill currently before the Energy and Commerce Committee will not fix the situation. Tell Congress that the AMA’s price-fixing system must be done away with, and that any recommendations the AMA makes regarding the value of services must be just that—recommendations—and must be transparent and open to the public. Please take action immediately!

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10 Responses to “Want to Price-Fix Medical Fees? Just Work It Out with the Government!”

  1. Laura Cozzarelli, MD says:

    I usually agree with Alliance for Natural Health, but the above rant is all wrong. We doctors have precious little input into how much we get for a specific exam or procedure. Our reimbursements have gone down drastically in the past several decades, so much so that many doctors go out of business and have to start over. No one hears about this, because no single doctor is ‘too big to fail’. If you want to direct your ire towards the real culprits in health care costs, look towards the insurers. They are the ones making Billions of dollars a year while denying fair payment to doctors and needed services to patients. So much of the practice of medicine nowadays is devoted to the masses of paperwork and teeth-pulling necessary to get paid, it’s ridiculous. And it takes away from patient care.

       1 likes

    • tomacz says:

      dr,I offer a different slant on medical issues,as a 55 y/o factory worker for a midwest amusement game
      co,a month into working there,my hands,fingers cramped using the air driven power tool,needing fast accurate movement for the 2 -3 minute cycle,like lycy in the chocolate factory,i fell behind,to chew outs from my 10 yrs younger supervisor,,after 30 days,barely making probation,,did so,and opted for a PPO plan,allowing me to see most illinois licensed physicians,,i saw a dr shambaugh in a 3 hrs appt, with food,chemical allergy challenge,and neutralization,put on a rigorous diet,sublingual drops for dust & mild,it was marvelous,I became the best assembly guy in the plant,maintenance 2 visits to this guy over 2 years,,the company cut back on health ins and other costs,,my PPO plan flew the coop,so did much my dexterity,,the only people,who saw what this meant in my work there was a nice lady supervisor,,she,,,,,,knew,simple as that,,drs,no matter the location,health plan,looked at me and treated me like a dead mouse,j’accuse,the medical profession,those who ,like in the AMA,who know either nothing of altcare AAEM type medicine,(ignorance),or do not wish to be bothered.
      next time an eye pt complains of poor eyesight,cramps,, dizziness,they do ok in the otoscope,no evidence of tumor,growth,lens is clear ,talk to an AAEM guy,then write up a referral
      AMA has power in HHS to recognize specialists,which power was challenged in SCOTUS dr dorothy calabrese,v US HHS,AAEM as amicus curiae,the suitasked for recognition of AAEMs immune system expertise..You and your collegues deserve just compensation for your labors,So do end users,the patients
      in paying for proper service

         0 likes

  2. Ann says:

    The biggest problem is the insurance companies and how they pay. Many doctors have different fee schedules depending on what insurance a patient has. Fees should be the same across the board regardless if a patient is covered by insurance or not. Insurance companies set the fees, or contract with the doctor, for what they pay. If a doctor becomes a provider for that insurance he gets what the contract says he will be paid and writes off the rest. If a procedure is worth $100.00 it should cost $100.00 to everyone who walks in the door.

    The worst thing that has been allowed is the Medicare replacement plans like Humans, Medicare Complete, Coventry and the many others that have surfaced. They all tell the patients they pay just like medicare but they do not. Can you save money with them? Only if you don’t use it. When you use it then you find out you are restricted to certain doctors, you pay co pays over and above the 20% Medicare does not pay, and some services are not covered at all. Patients are told they get free routine visits. They neglect to say once a medical diagnosis is determined it is no longer considered routine and all co pays apply.

    We have lost patients in our office because they came and still had Medicare and were charged a certain fee. They come back and having stitched to some replacement plan that requires a co pay. We bill them for the co pay and they are mad and say we have never billed them that before. We explain it is their new insurance that requires us to collect the co pay. They don’t believe us because they were told it would be free when they signed up for the insurance. Many have said they won’t be back because we are ripping them off. Many times if they call the insurance they are told we probably did not bill it correctly and they should not have had to pay.

    We waste appointment times when the patient tells us when they make the appointment they have Medicare but when they arrive at the office they pull out a Medicare replacement card that we can not accept. Or worse, we see them, bill Medicare, and then find out they no longer have Medicare but a replacement plan they we are not providers for.

    Medicare replacements also are wasting our Medicare money because they get another 15% added into the money Medicare sends to them to administer the programs.

    So now we have doctors that are receiving low reimbursements, having to fight to get paid, or not getting paid at all. The insurance company is…

       1 likes

  3. Loud Liberal says:

    You said: “In essence, this is a form of medical price-fixing that is being sanctioned—indeed, protected—by our government. Doctors are determining how much the government should pay them for their services, and there is no independent or objective body to oversee them.”

    Three false premises:

    (1) This is a form of fascism which is, by definition, the merger of corporate and government power. Ever since the incompetent and corrupt Ronald Reagan deregulation movement, the republican party has been busy enabling corporations to literally take over the government agencies that are supposed to be regulating them by, among other things, appointing industry loyalists to head regulatory agencies. The FDA is a perfect example of what industry insiders refer to as a “captured regulator,” captured by the drug industry that it is supposed to be regulating. The FDA is headed by drug industry loyalists who will leave the FDA for work in the drug industry for much more money than they make working for the FDA. Whether there is actual quid pro quo kick backs being pain is unknown at this time, but, given the quid pro quo kickbacks that drug companies pay to doctors to prescribe their drugs, it wouldn’t surprise me. As a result, the FDA exerts its power protecting the profits of drug companies (against competition and from claims by dead or injured drug consumers), at the expense of public health, safety and welfare.

    (2) There is an independent, objective, disinterested body overseeing the fees that Medicare pays doctors. It is called THE GOVERNMENT! If it is not doing its job, the correct inquiry becomes – is it, yet, another “captured regulator,” headed by industry insiders who, personally, are not independent, objective or disinterested?

    (3) Your implied false premise is that the “free market” is the magic elixir that will cure what ails the medical business. It is not. The free market is incompetent to regulate ANY industry, much less medicine. The entire premise of supply and demand regulating price presumes that the consumer has a choice to say NO! “No, I don’t need your product or service so much that I am willing to pay that price.” In medicine, there is no such choice. You don’t have the option to say no, to wait for next years model or to shop around for a better price. As a result, medical pricing is based on “blackmail.” You pay, or you die. THAT is how the free market works in medicine. In a modern, civilized,…

       0 likes

  4. Nancy Abler says:

    I’m assuming that the AMA is the Hierarchy that oversees the Practice of Medicine in this country.
    It seems the AMA is self-empowered with little if no accountability to the patients they treat in matters of life and death, and who are also their customers. This is a dangerous arrangement with an inherent potential for Medical Abuse of Power. Any professional group selling their medical treatment services so vitally involved with the health and survival of citizens should be regulated by medical experts who represent the patients’ rights to protection from predatory abuse of power.

       1 likes

    • Loud Liberal says:

      I don’t know what you mean by “oversees the practice of medicine.” The AMA does not regulate the practice of medicine. The medical profession is regulated, and medical providers are licensed to practice, by the state in which a medical provider practices. It is not the AMA or the federal government.

         0 likes

  5. Jan says:

    This started in 1965 with Medicare when LBJ allowed hospital and medical associations to write the bill. It was how he removed their opposition and they are now entrenched. The only way to change it is to push HSAs and develop a system to make gov’t funded HSAs to Medicaid and indigent Medicare recipients as well as good deductible plans for everyone else.

       1 likes

  6. Laraine Broschinsky says:

    How can we ever control medical costs if prices for procedures are fixed by those who receive the payments? This seems insane.

       2 likes

  7. Nellie McConnell says:

    The gov and Obama care has priced me right out of anything I can afford. I have a house and I am low income but don’t qualify for a low income medicaid card. My second insurance cost me about 2500 a year for them to pay the 20% of what Medicare don’t pay. My S.S increase didn’t cover the increase in Medicare increased. I have not had good health care with any HMO> Obamacare is taking away the payment of the doctors and hospitals while they gov is paying for illegals to have babies who will end up on Welfare with Medical. No one is getting paid on time. I had knee surgery, the surgery was on 01/10 and my doctor didn’t get paid until 10/11. I have lost two doctors and our ambulance service because of non payment or not paid on time. Our ambulance service was a small ambulance service and we had to transport an illegal even if they didn’t need transported. They can sue if they are not transported but our government doesn’t seem to care how much loss of jobs and who get medical as long as they please the illegals. Between not getting paid and the loss of revenue transporting illegals they couldn’t make payroll. GOD BLESS OUR COUNTRY! Obama doesn’t have a clue what he is doing but he is taking our country down with-in with debt, Welfare, giving benefits to refugees and illegals! no jobs! just borrow more money from a foreign country and put us in debt more.

       4 likes

    • Mary Malatesta says:

      Nellie: You are right on! I agree 200%. It is a sorry state the U.S.A. is in with this corrupt administration.

         0 likes

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