Medicare's physician payment form - includes bibliography

Physician Executive, Sept-Oct, 1990 by Richard M. Lauve

VPS, RBRVS, and BBC will combine in the long term to decrease the incomes of some specialties, and of all specialties in some geographic areas. The supply of some providers in some practice settings, particularly those with barriers to the entry of young competitors because of near-monopoly contracts, such as anesthesia, pathology, and radiology may be affected. If price decreases are perceived by providers as severe, and a 20-40 percent drop in income will be significant for any provider, pressures will develop within those specialties for new limitations on training, licensure, and credentialing of potential competitors. Providers will oppose BBC in the long run (especially if VPS allows increases in fees below overall inflation), but will have difficulty having this consumer subsidy repealed.

Effect on Consumers

The Medicare-eligible consumer will have no difficulty in evaluating BBC. This part of the reform will increase the perceived Medicare subsidy to the consumer and will expand demand for services. Contrary to the limited effect of BBC on most providers, most enrollees are likely to view any limitation on billings as at least potentially beneficial.

The Medicare consumer can be predicted to oppose VPS in the long term if the provider argument of decreasing access to care and eventual rationing under a budgeted restriction on the growth of Medicare axlej itures is correct. BBC has a tendency to increase demand while VPS tends to decrease supply, worsening the shortage. If demand outstrips supply significantly in the long run, "black market" provider sources of some type will develop.

Medicare enrollees are likely to be indifferent to RBRVS initially. This portion of payment reform is budget neutral to the enrollee. Any lowered payment for procedures will be offset by increased payment for primary care services.

Working consumers are more sensitive than retirees to limitations of access and convenience. Workers are also almost totally "blind" to health care costs because health care benefits are not taxed. Workers insured through employment benefits are unlikely to appreciate the savings realized from an expenditure-limiting program in benefits packages. The detrimental effect on access and convenience will lead to opposition to any effort to incorporate expenditure limits in worker's health care programs. Additional efforts by indemnity plans to encourage limits to balance billings are likely to be favored by the worker, as this portion of their health care expense is visible.

Any cost (or volume) shifting toward the working consumer that might result from the Medicare payment reform package would also be hidden from the insured worker. Workers will remain indifferent to volume limits, billing caps, and new fee schedules established solely in the Medicare sector.

Consumers as a whole will oppose VPS because of the supply limits implied in expenditure limits. BBC will be supported by consumers, and the caps will be difficult to withdraw once this "subsidy" has benefited the consumer. Consumers, similar to payers, will initially be indifferent to RBRVS, but increases in payment for some services by Medicare will stimulate demand for similar coverage by worker's plans. A modified RBRVS will therefore eventually be demanded by the working consumer.