Can We Fix Medicare While Pretending the RUC Does Not Exist?

There has been much media discussion of how the US Congress just forestalled an across-the-board cut in Medicare's payments to physicians that threatened to markedly decrease access to care. There was some discussion that this was just a temporary fix, but more fundamental solutions would be difficult. Some of the media discussion made some points that previously went unsaid, including:

  • Medicare fixes payments to physicians - For example, a Wall Street Journal editorial noted, "As a virtual monopoly, Medicare uses a complex formula to set reimbursement rates for thousands of services. In short, it controls prices. That's why doctors are supposed to eat a pay cut, even though everyone knows this would prompt more doctors to stop seeing Medicare patients."
  • Changing the system would be difficult, because it might mean some people would make less money - For example, a New York Times article noted, "lawmakers are pleading with physicians’ groups to come forward with a comprehensive proposal. But that could be difficult because any new formula would almost surely produce winners and losers among doctors."
Those are two good points that start getting at some basic parts of the problem. But even this new clarity seems to miss other fundamental questions, most notably: how did the current Medicare system of fixing prices end up doing so in a way that is so unfavorable to primary care and other cognitive physicians' services, and so favorable to surgery and other procedures?

How the current system arose is no longer a mystery, and was certainly a work of mankind, rather than the supernatural.

As we have discussed before (here, and see this post with links backward), based on several key published articles,(1-4) it is the RBRVS Update Committee (RUC) that seems most responsible for the current state of affairs. Medicare payments to physicians are based on the Resource Based Relative Value System (RBRVS). RBRVS was put in place in the early 1990s, mainly to try to restore then present imbalance in payments that already favored procedures over primary care and cognitive services. Medicare apparently gave the RUC de facto authority over how the system would be updated. The updates the RUC put in place over the years generally involved increasing payments for specific procedures over time, even though most procedures actually get easier to do in the years after their development, and the volume of procedures was increasing much faster than that of office visits. This probably was related to how representatives of specialties that emphasize procedures dominate the membership of the RUC, (although the names of individual members of the RUC, and its deliberations are kept secret). Since the Medicare payment system requires that the overall payments to physicians grow no faster than inflation and the increase in the elderly population, increases in costs due to increasing prices and volume and procedures lead to across-the-board cuts of all payments, which mainly hurt payments for office and hospital visits.

What is mysterious is why Medicare relies on the RUC to the exclusion of any other input; how the AMA can claim the RUC is merely an "advocacy group," rather than the de facto controller of payments to physicians; what individuals are currently RUC members and what goes on during its proceedings; why do managed care organizations and health care insurers base their payments to physicians so slavishly on the RUC governed Medicare fee schedule; and why, outside of a few academics and bloggers, is discussion of the RUC so scanty?

Any real attempt to reform the fundamental inequities in what we pay for health care, inequities which have driven our over-use of procedures and high-technology and devalued thoughtful compassionate, continuing, comprehensive, and continuous care, must address the bizarre and mysterious way payments are fixed. To do so, health care policy makers and the public at large will first have to acknowledge and publicly discuss the problem. It should not be only a few academics and bloggers who are willing to talk about it.


1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. (link here)
2. Maxwell S, Zukcerman S, Berenson RA. Use of physicians' services under Medicare's resource-based payment system. N Engl J Med 2007; 356: 1853-1861. (link here)
3. Newhouse JP. Medicare spending on physicians - no easy fix in sight. N Engl J Med 2007; 356: 1883-1884. (link here)
4. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. (link here.)