Want to Price-Fix Medical Fees? Just Work It Out with the Government!July 30, 2013
The 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!