Medicare's physician payment form - includes bibliography

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

Conclusions

Payers' concern over rising health care costs is the driving force in Medicare physician payment reform. VPS, as beneficial as it would be in theory to payers, is not beneficial to consumers and certainly is not beneficial to providers. Furthermore, private health care systems (such as PPOs) that have endeavored to reward restrained volume have consistently failed because of the inability to control volume in the short term on an individual provider basis. When the negative effects on long-term global Medicare services supply are added to this picture, VPS (alone or in combination with other portions of the OBRA '89 actions) will succumb to consumer and provider opposition. Indeed, if the OBRA '89 package is not amended by Congress, unfulfilled demand will predictably be satisfied by services provided in such a way as to circumvent the expenditure limits. The increased demand effect of BBC will hasten and worsen this imbalance in supply and demand.

Payers and consumers will benefit from the use of BBC. Only a minority of providers will be affected by BBC in a significant way in the short-term, and providers, as a whole, are unlikely to initially oppose the caps. In the long-run, income decreases from VPS combined with BBC will lead to provider opposition to caps. BBC will survive, however, because of strong support by subsidized consumers.

Provider support for RBRVS, even though not universal, indicates that it, combined with BBC, will be most likely to succeed (at least in the short-term). RBRVS will cause limited economic effect (except for perhaps a shifting of physicians to rural areas) as long as BBC remains in effect. If these caps should be eliminated through some unforeseen process, RBRVS would fail because of the Medicare enrollees' exposure to a large "balance bill."

RBRVS will eventually result in an increased volume of some services, as procedure-oriented physicians attempt to recover lost income (and if the RBRVS converter is used to balance the federal budget, all services will show increases in volume). This effect will be buffered by payers' use of utilization monitoring techniques and by consumers' continued use of the tort system.

RBRVS and BBC are therefore the most likely parts of physician payment reform to be accepted by the payer-consumer-provider triumvirate and survive in the long run.

References

[1] Long, H. "Critics Ignore Volume in Their Assessment of Health Care Costs." Physician Executive 14(2):25-6, March-April 1988.

[2] Davis, K. "Why Expenditure Targets Would Work." The Internist 30(8):6-9, Sept. 1989.

[3] Relman, A. "Assessment and Accountability: The Third Revolution in Medical Care." New England Joumal of Medicine 319(18):1220-2, Nov. 3, 1988.

[4] Roper, W. "Perspectives on Physician-Payment Reform. The Resource-Based Relative Value Scale in Context." New England Journal of Medicine 319(13):865-7, Sept. 29, 1988.

[5] Lee, P., and others. "The Physician Payment Review Commission Report to Congress." JAMA 261(16):2382-5, April 28, 1989.