Medicare Fees: The RUC is Bad, But There’s No Point Regulating It

Politico recently ran an interesting story on the Relative Value Scale Update Committee — the “RUC”, a body convened by the American Medical Association that fixe the fees that Medicare pays physicians. It describes the absurdity of a committee of physicians fixing fees that the government pays physicians, and demonstrates how the RUC pays primary-care practitioners much less than specialists. Our blog has covered this thoroughly:

StethoscopeWilliam Hsiao, the economist who designed the Medicare Prospective Payment System, determined Medicare’s fees as follows: “He put together a large team that interviewed and surveyed thousands of physicians from almost two dozen specialties. They analyzed what was involved in everything from 45 minutes of psychotherapy for a patient with panic attacks to a hysterectomy for a woman with cervical cancer. They determined that the hysterectomy takes about twice as much time as the session of psychotherapy, 3.8 times as much mental effort, 4.47 times as much technical skill and physical effort, and 4.24 times as much risk. The total calculation: 4.99 times as much work. Eventually, Hsiao and his team arrived at a relative value for every single thing doctors do.” (Rick Mayes and Robert A. Berenson, Medicare Prospective Payment and the Shaping of U.S. Health Care, Baltimore: Johns Hopkins University Press, 2006, p. 86.)

The Politico story also described a lawsuit which asserts that the RUC should be regulated like a Federal Advisory Committee, and not allowed to operate in secret as if it were just another committee of a private professional society. The American Medical Association’s rebuttal of the Politico feature is exactly what one would expect from an inside-the-Beltway mindset:

When providing input to Medicare, the RUC and others must follow principles established decades ago by economists at Harvard University that are required by federal law and regulations.

In recent years, the committee has evaluated (AMA login required) more than 1,700 medical services accounting for $38 billion in Medicare spending. The committee has sent recommendations to the Centers for Medicare & Medicaid Services for reductions or deletions of 935 services, resulting in a redistribution of more than $3 billion in the Medicare program.

In fact, the committee’s complicated work has long garnered the praise of government officials.

Imagine that: The RUC not only fixes prices, but fixes prices according to regulations “established decades ago”! What could go wrong with that? Substitute “groceries”, “auto parts”, “clothing”, “athletic equipment”, or anything else for “physicians’ fees” and you immediately see how ridiculous the whole thing is. Can you imagine a committee where hockey coaches and baseball coaches get together to give the government advice on the relative prices of pucks versus baseballs?

Nevertheless, regulating the RUC as a Federal Advisory Committee would not solve the fundamental problems. First, the federal government should simply not be fixing medical prices, any more than it should fix prices of groceries for people receiving food stamps (SNAP). Second, I do not pretend to know the value of a family doctor versus another specialist, but it is certain that a third-party payer (government or private insurer) will have a much harder time understanding what a primary-care doc does during an office visit than an orthopedic surgeon does during a knee replacement. Specialists will always be paid more when prices are fixed this way, whether the process is transparent or not.


Comments (5)

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  1. John Fembup says:

    “solve the fundamental problems.”

    Yeah, we wish.

    I’ve become very cynical about governments at any level solving “fundamental problems”. Too often the problems elected officials and other public servantsare trying to solve are political threats to them, or finding new ways to use their positions to cash in personally. I don’t think that’s new in government. But it’s not going away either.

    • John R. Graham says:

      Be optimistic! As noted in the article, we would not tolerate this in any other sector of our society (except K-12 education, I suppose). So, we should be able to get rid of it in health care.

  2. Ron Greiner says:

    John, don’t be so harsh. Some of these central planners mean well but they are just FRUITCAKES. Case in point, Jeb Bush disregards the fact that 88% of Floridians support the legalization of Medical Marijuana in the state of Florida which is on the ballot come November.

    Jeb is trying to run shot-gun for Medicare Fraud King Governor Rick Scott because this central planner has decided the War on Drugs must NEVER end. Jeb says if PROHIBITION is ended the tourist industry will wither and die. Of course Colorado has seen a dramatic uptick in WEED Tourism but these 2 are just spewing propaganda. These two are nothing more than a couple of clowns.

    I just got off the phone with the next Governor of the Sunshine State, Libertarian Adrian Wyllie. I was calling his assistant but Adrian picked up the phone. I said, “Good news Governor, Newsweek has just reported:

    [America has a major problem with prescription pain medications like Vicodin and Oxycontin. Overdose deaths from these pharmaceutical opioids have approximately tripled since 1991, and every day 46 people die of such overdoses in the United States.

    However, in the 13 states that passed laws allowing for the use of medical marijuana between 1999 and 2010, 25 percent fewer people die from opioid overdoses annually.

    “The difference is quite striking,” said study co-author Colleen Barry, a health policy researcher at Johns Hopkins Bloomberg School of Public Health in Baltimore. The shift showed up quite quickly and become visible the year after medical marijuana was accepted in each state, she told Newsweek.]

    Libertarian Adrian Wyllie supports ending PROHIBITION for Medical Marijuana and for recreational use. I said, “The problem is I don’t think Florida has enough hotel rooms if we end PROHIBITION because Colorado tourism is spiking.” The future Governor said, “Yes, I know. The difference is that unless you are a skier why would anybody go to Colorado? Florida is paradise to begin with.”

    I told Adrian, “Oxycontin is a huge problem. My next door neighbor, a medical doctor, broke many little bones in his spine from excessive running and is now totally disabled. Because of pain medication his mind is now gone and last year he was committed to a nursing home at the age of 52. So Jeb has shot himself and Rick Scott in the foot, these clowns.”

    Jeb Bush and Rick Scott are targeting death to the sick and hurt! Just say NO to Jeb in 2016.

  3. John Fembup says:

    “Some of these central planners mean well”

    I remember thinking that, back in the day. Now I think most “central planners” have not thought nearly enough, which makes me a particularly hard sell for their meaning well.

  4. OrlandoChris says:

    I’m voting for Adrian Wyllie and Bill Wohlsifer