The new law on Medicare's payments to physicians

Congress's recent decision to pay primary care physicians more for treating Medicare patients will have implications for the relationship between physicians and private insurers as well. The approach taken in the Omnibus Budget Reconciliation Bill, passed in late 1989, was to limit funds paid by Medicare for 'cognitive care' - taking patients' histories, giving advice, or developing a treatment plan. A resource-based relative value scale (RBRVS), under which physicians' services are ranked according to the resource costs of providing them, was developed and has been endorsed by several physicians' associations. Changes include increases of 16 percent for internists, 37 percent for family practitioners, 7 percent for otolaryngologists, and 1 percent for obstetricians/gynecologists, with decreases of 21 percent for radiologists, 20 percent for thoracic surgeons, 17 percent for ophthalmologists, 10 percent for orthopedic surgeons, 9 percent for general surgeons, and 3 percent for urologists. The major points in the reform package are described. Growth of payments will be limited, but the Medicare program may become more stable, with more value placed on primary care. The phase-in of RBRVS will take five years, beginning in 1992. Relative values for services will be based on work, practice expenses (about half the cost, including non-physician personnel, office space, etc.), and costs of malpractice insurance, with certain adjustments for geographic differences in the cost of living so that rural and urban physicians' incomes will be more equal. Malpractice insurance costs will be based on the actuarial risks of different services. Doctors in Manhattan will lose, while those in Jefferson County, Missouri, will gain, partly as a result of enormous differences in current costs of procedures. Medicare's assignment policy (whether a physician agrees in advance to accept the Medicare rate) and controls on the volume of services offered to Medicare patients - something physicians have opposed - are discussed. The Agency for Health Care Research and Policy has been created to fund research on the clinical practice of medicine. The new Medicare payment plan reflects a move away from market-based determination of physician's fees, toward administrative regulation. Effects on private insurers are anticipated, but the nature of these effects is not known. The Health Care Financing Administration must develop a model fee schedule by September 1, 1990, and physicians would do well to expand their involvement in economic and political aspects of these decisions. (Consumer Summary produced by Reliance Medical Information, Inc.)