How Medicare payments are set

It’s never a bad idea to bring this point up yet again:

Reporters Peter Whoriskey and Dan Keating have opened Post readers’ eyes to the fact that Medicare pays for physician services — a $69.6 billion item in 2012 — according to an arcane and little-known price list, over which doctors themselves exercise considerable and less-than-totally-transparent ­influence.

Known as the Relative Value Update, the process consists of a 31-member committee of the American Medical Association (AMA) recommending what Medicare should pay for some 10,000 procedures — with the fees based in part on how long it takes to complete each one. This time-and-motion study often fails to take full account of changing technology and other factors affecting physician productivity, so anomalies result: For example, Medicare pays for a 15-minute colonoscopy as if it took 75 minutes.

Here is a bit more, here is the longer article.

By the way, there is also this new result:

In one of the study’s notable insights, Dr. [Joseph P.] Newhouse said, “we did not find any relation between the quality of care and spending, in either Medicare or the commercial insurance sector.”

That is from a new study of regional variation in Medicare expenditures.  The study itself is here, and it seems to imply that regional discrepancies in Medicare expenditures cannot be easily rectified by rewarding the more cost-efficient regions.  For one thing, cost variation among providers, within a region, is large, which makes it hard to apply incentives on a regional basis.


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