The legislation that created Medicare was passed in 1965 with limited time to settle on a method of paying physicians. In lieu of a detailed analysis of the question, Congress adopted payment policies designed to gain support from the medical profession, which had opposed including physicians' services in the Medicare program. The legislation specified that physicians would be paid according to the "usual, customary, and reasonable" (UCR) reimbursement system that had been used "largely on an experimental basis" by a few Blue Shield plans for a little more than a decade.
Medicare changed the name of the payment system to "customary, prevailing, and reasonable" (CPR) reimbursement. This meant a physician's actual charge for a Medicare service would be subjected to two screens: The "customary" charge was what the physician had charged for the service during the previous year, while the "prevailing" charge was set at the seventy-fifth percentile of customary charges of other physicians in the same specialty and geographic area. The "reasonable" charge - what the physician would be paid - was the smallest of the actual charge, the customary charge, and the prevailing charge. Beginning in 1972, annual increases in prevailing charges were limited to increases in the "Medicare Economic Index" (MEI), which measured physicians' practice costs.
During the 1980s, Congress began a series of actions designed to control rapid increases in Medicare Part B spending. In 1984 customary and prevailing fees for all physicians' services were frozen, and when the freeze was lifted two years later, the prevailing fees for "participating" physicians were increased by 4 percent. (Participating physicians are those who agree to accept Medicare's reasonable fees as payment in full for all services they furnish to Medicare beneficiaries during the year.) In 1987 the freeze was lifted for all physicians, but nonparticipating physicians were subjected to limits on their maximum allowable charges for four more years. Against this background, Congress created the Physician Payment Review Commission (PPRC) in 1986, with a broad mandate to advise Congress on "basic reform needed in physician payment". In its first Report to Congress, the PPRC recommended replacing the existing CPR payment system with a schedule of fees for each service. In its second report, issued March 31, 1988, the PPRC recommended basing the fees on the "relative value" of the work needed to produce each service. The particular definition of physician work was supplied by William Hsiao and colleagues at Harvard University.
According to their conceptual framework, "work" consisted of the time, mental effort and judgment, technical skill, physical effort, and stress from iatrogenic risk (that is, the risk of a medical problem being caused by medical treatment) that went into producing each service. Allowed charges for Medicare physicians' services were defined as the lesser of the actual charge or the fee determined from the resource-based relative value scale. Legislation to establish the Medicare fee schedule was enacted in the Omnibus Budget Reconciliation Act of 1989 (OBRA89), and, in January 1992, a four-year, phased implementation began. The fee schedule took three years to develop and elicited more than 95,000 comments. When finally implemented, it covered approximately eight thousand distinct services.
In addition to setting relative fees, Medicare has attempted to control overall Part B spending through an "expenditure target" program that adjusts the fees up or down according to whether total expenditures fall below or exceed a target. Initially known as volume performance standards (VPS), the expenditure targets were replaced by the Balanced Budget Act of 1997 and the program renamed the "sustainable growth-rate" (SGR) system. Under SGR, the expenditure target is allowed to increase for inflation in physicians' practice costs, changes in enrollment in fee-for-service Medicare, changes in spending due to law and regulation, and growth in the real gross domestic product. I will say more about the VPS/SGR system when I come to the topic of global budgets, which discusses proposed reforms of Medicare Part B. Medicare Part B pays for many services in addition to those of physicians. Payments for durable medical equipment (DME) and clinical laboratory services are based on a fee schedule, and while hospital outpatient services and home health agencies historically were reimbursed on a "reasonable cost" basis, the Balanced Budget Act of 1997 provided for implementation of a prospective payment system for those services.
Part B payment for diagnostic imaging is different from other services and could best be described as both "in and out" of the fee schedule. If the test is performed in a facility such as a hospital outpatient department, the costs of equipment, supplies, and technician time are covered by a "facility payment." If the test is performed in a doctor's office, these costs are covered by a fee schedule known as the "technical component" (Medicare Payment Advisory Commission 2004b). Interpretation of the image by a physician is called the "professional component" and is reimbursed under the physician fee schedule regardless of where the test is performed. If the test is performed and interpreted by the same physician, the physician submits a global claim that includes both technical and professional components.
Our website is not responsible for the information contained by this article. Articleinput.com is a free articles resource thus practically any visitor can submit an article. However if you notice any copyrighted material, please contact us and we will remove the article(s) in discussion right away.
Note: This article was sent to us by: Laura S. Hallen at 03092010
1. The real Medicare reform lies in the use of indemnities
All articles are property of their respective authors. Please read our Privacy Policy!
© 2009 ArticleInput.com.