The Secretive Group Behind Medicare Reimbursements

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Earlier this month, the Washington Post published a blockbuster front-page story about a secretive committee that determines what Medicare pays physicians for their work. Part of the American Medical Association (AMA), the committee estimates the time and intensity of various doctor tasks, and the recommendations are plugged into a formula that sets Medicare reimbursements. The committee overestimates the time it takes to perform myriad medical procedures, which thereby increases the amount doctors can earn from Medicare. One gastroenterologist in the Post story would have to work 26 hours, according to the committee time estimates, to accomplish what he gets done in a typical workday.

What’s surprising about this AMA committee’s influence is not that doctors inflate the time it takes to deliver medical care, as the Post story documented, but that the federal government relies on the committee so heavily — almost blindly at times.

‘What started as an advisory group has taken on a life of its own,’ said Tom Scully, who was Medicare chief during the George W. Bush Administration and is now a partner in a private-equity firm that invests in health care. ‘The idea that $100 billion in federal spending is based on fixed prices that go through an industry trade association in a process that is not open to the public is pretty wild.’

The Post story made a splash. In a letter to the editor, AMA president Ardis Dee Hoven said the piece was “a disservice to readers” and that the committee recommendations are just guidelines. The Centers for Medicare and Medicaid Services is “not obligated to accept them,” wrote Hoven, although some 90% of the committee’s recommendations are accepted without change, in part, because the federal government has not devoted the resources needed to study physician workflow as the committee does.

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Its recommendations apply only to Medicare reimbursements, but are often the basis for what private insurers pay for various physician services. Since doctor decisions drive much of the spending in U.S. health care, the committee’s influence on the cost of overall medical spending is enormous.

While the Post story spawned reactions throughout the health care industry, the truth is that many health-care-policy experts have long known that the AMA group, known as the AMA/Specialty Society RVS Update Committee (RUC), contributes massively to the illogical and inflated way that health care prices are set. (A 2010 investigative story in the Wall Street Journal similarly broke open the truth about RUC.)

Writing on the blog of the journal Health Affairs in February, health care analyst Brian Klepper, who co-founded a website called Replace the RUC!, called the committee “the most blatantly corrosive mechanism of U.S. health care finance.” He added that, through the AMA, “health industry’s grip on U.S. health care policy and practice is all but unshakable and unaccountable, and it appears to have co-opted the reach of law.”

RUC bases its recommendations on surveys filled out by physicians who are told that information they provide on the time and intensity of services will help determine Medicare reimbursement rates. RUC internal deliberations are kept secret and its meetings are closed to the public; outsiders can attend if they receive an invitation, but must sign a nondisclosure agreement.

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In her response to the Post story, Hoven of the AMA notes that Medicare physician payments must be budget neutral, meaning higher payments for one service mean lower payments for another. This pits specialists paid primarily for procedures and surgeries against primary-care doctors who make their livings through face-to-face examinations and health management. The recommendations, according to the Post story, heavily favor physician specialists at the expense of primary-care doctors and help drive the U.S. health care system toward more expensive, extraneous medicine and away from simpler, low-tech health care management by internists and family doctors.

In general, primary-care doctors are paid less than specialists, contributing to a shortage of primary-care physicians across the country. The new Affordable Care Act (ACA) makes some efforts to correct the imbalance, giving primary-care doctors bonus payments through Medicare and providing incentives like loan forgiveness for doctors who choose to practice primary care in rural areas.

The ACA contains another provision that may also reduce the power of RUC altogether.

The law creates an entity known as the Independent Payment Advisory Board (IPAB). The group will make recommendations to Congress about Medicare physician payment levels if the growth of Medicare spending gets too far ahead of inflation. The recommendations will automatically go into effect unless Congress votes to rein in spending another way.

IPAB has tremendous potential to curb physician payments in Medicare, which is why the AMA opposes it. An existing method to keep Medicare physician spending under control, called the Medicare Sustainable Growth Rate Formula (SGR), is easier for Congress to override. In a move known as the “doc fix,” Congress regularly votes to cancel SGR reductions in physician pay under heavy pressure from the AMA.

In addition to making recommendations that cannot be easily undone, IPAB has another advantage over RUC. It will operate in the open, with its members announced publicly and its procedures made public.

MORE: An End to Medical-Billing Secrecy?

15 comments
FairGoforDoctors
FairGoforDoctors

To our friends in the US: please learn from the Australian experience with Medicare. Don't let it happen in your country...

There is a secret federal government pay scandal happening in Australia. 4000+ Aussie GPs are being paid HALF Medicare rebates for the exact same work and responsibility. Who would study to be a doctor, knowing THIS lay ahead? The Medicare rebates of these highly-skilled doctors have been FROZEN since 1992. These doctors training and qualifications are absolutely identical to the majority of their GP colleagues who get paid the normal GP Medicare rebate.

The Medicare rebate these doctors get is now LESS than what my mowing man gets for cutting my tiny lawn, for the same time! And he doesn't have any staff costs, office costs, medical liability costs, etc that have to come out of the Medicare rebate before the doctor gets paid! (And my mowing man certainly doesn't take the immense responsibility these doctors take every day.)

If something isn't done to stop this shocking discrimination these Aussie doctors will have to leave medicine and start all over again in another career.

This whole thing is ridiculous - and tragic. It looks like eventually Australia could go the way of the UK in this regard. Eventually, if something isn't done to stop this appalling injustice and the way GPs are treated within the Medicare system, is that there will be less and less "home-grown" GPs, and we will need to ramp up our importation of GPs from other countries. If the standard of training, qualifications and skills are the same, I suppose the Australian people won't mind. But if the standard is not the same, perhaps some of the population will look back in wonder, and say "What happened... How did this situation all start? Why did our Aussie doctors leave?" And maybe someone will remember the government's appalling discrimination against some of Australia's OWN doctors, and say that was one part - at least - of how this exodus all began.

Learn more - and don't repeat Australia's mistakes.

www.FairGoforDoctors.org

http://www.facebook.com/fairgo4doctors

oknahs
oknahs

They took the pages of the auto dealers service manual.   The manual is set up where dealers techs can perform a 15 minute repair and charge two hours.  Flat rate shops do this all the time.  A spark plug and wire change on a 1995 corvette says it takes 4 hours and I timed the tech in which he finished in 45 minutes.  The cost per hour at the dealer was $125 hr.  Health care costs are inflated for medicare but also the family paying the bills.  UPMC never had a deductible on drug costs for the best plan.  2013 its $500 and premiums increased 20% over 2012.  Express Scripts were the leader in low cost insurance coverage drugs.Not any longer.  Walmart has a 90 day listing of $4 and $10 generics without insurance.   If you are luck enough to have it the price ranges from $2  a month for metformin to $3 month for flexeril.   Buyer beware.....

AnthonyMcMillan
AnthonyMcMillan

Is there any part of our govt. that isn't corrupted by big business anymore?

EveryDay
EveryDay

Once again, people. Reimbursement to doctors has been going DOWN. If AMA had so much control, why would reimbursement be going down? The reason why Medicare costs are increasing is because more and more people are using medicare. In fact, the AMA has been pushing for residency positions (so we can get more docs to treat people), and has been pushing to get away from fee for service entirely. 

rutnerh
rutnerh

Incredibly disgusting example of a mega greed driven AMA group, like modern Robber Barons, but acting in collusion with an equally greedy legislature in driving up health care costs and our deficits. Another truly sickening example of modern economic crimes against US humanity, not confined to WS, of a few defrauding the many for which there ought to a law ...not likely to pass in our Congress.

shepherdwong
shepherdwong

News flash: giant industry controls public policy, costing the American public dearly.

The AMA has been a boil on the butt of the American health care system from opposing the creation of Medicare to blocking any sort of single-payer public option. Not to mention failing to police bad doctors and bad medicine that kill 100,000 patients per year.

EveryDay
EveryDay

No offense, but this paints a pretty inaccurate picture. Medicare payments to doctors have gone DOWN over the past decade, not up. The only reason any doctor these days makes more money is by seeing more and more patients and working harder. This board is not designed to increase payments. What it does is try to distribute the payments that it does receive (which as I said, have gone DOWN big time) to different doctors based on what they do. Now, they may get that wrong, but like I said, they don't determine how much they get paid from Medicare. 

All these articles trying to target doctors' salaries are getting silly. Doctors salaries have gone down. If they do go up, it's only because they are working more and seeing more and more patients. Payments to doctors makes up less than 10% of Medicare spending. Where are the articles on the other 90%? Why aren't there articles on the 90%? Is it because many of those payments go to large corporations, and not individual doctors that have become easy targets? Especially considering that payments to doctors have gone down, and continue to go down? The reason why Medicare spending has increased is because more and more people use it. 

Onepatriot
Onepatriot

Why doesn't Medicare have a computer program to use a doctor's id number to average out the number of billings they got over a months time for office visits. They could pick a number of doctors  in each specialty and average it, using random months for each. 

That would give them a pretty accurate picture to base the payment on.  Or, would that be too simple?

TAZTlh
TAZTlh

If this is so then when is this board going to be checked on and another system created to correct the problem?

jess60901
jess60901

So we pay more for second-class health care?  Surprise! What else is new?

StephenSwain
StephenSwain

Is this really much of a surprise?  You have to remember that to become a physician in the first place you have to have a very high IQ.  To survive the rigors of medical "training" you have to have tremendous endurance.  So the docs who are on this committee, arguably, have survived right to the top of the heap.  Sounds pretty Darwinian.  Just so happens that the money they are programming is coming from "our" pockets, not theirs.  Short-term, very smart.  Long-term, maybe not so very smart.

formerlyjames
formerlyjames

@Onepatriot 

I would assume that both Medicare and all major health insurers possess such information, but I fail to see how the data would not be inflated as is all American health care.

MrBenGhazi
MrBenGhazi

@TAZTlh There's this thing that was passed a couple years ago called the ACA, or Obamacare. Perhaps you've heard of it?