Time for a Check-Up: Reconsidering Physician Reimbursement Rates

Doctor Medicine Health Stetoscope Medical

The financial state of the U.S. healthcare system is decidedly unhealthy. For a country that prides itself on market-based efficiency, the United States’ performance on any number of value-based outcomes is ironically dismal. In measures of equity, accessibility, and efficiency, the United States lags far behind its equals in the Organization for Economic Co-operation and Development (OECD). Moreover, healthcare spending claims a whopping 17.9% of the gross domestic product — nearly two times that of comparable OECD countries — while falling short on health-related outcomes such as life expectancy and infant mortality.

Plagued by runaway health expenditures, the U.S. healthcare system is in dire need of a checkup. Despite the political controversy that healthcare inspires, taming runaway costs and improving population health outcomes does not require a vast overhaul of the healthcare system. Healthcare reform need not be as sweeping as House Democrats’ recently introduced Medicare for All  bill, nor must it be as transformative as Obama’s original single-payer system. In fact, adjusting reimbursement policies to reflect the true value of basic medical services could sufficiently realign healthcare providers’ incentives to deliver the types of care needed to boost national health outcomes.

Historically, physicians that serve Medicare patients have been compensated on a fee-for-service basis. In 1989, Congress mandated a switch from the usual, reasonable, and customary (UCR) fee schedule to a new formula that accounted for the value of a physician’s time and the cost of resources in determining the prices that providers would be paid for delivering services to Medicare patients. While the Centers for Medicare and Medicaid Services (CMS) ultimately set the fee schedule for reimbursing providers, services priced according to this new Resource-Based Relative Value Scale (RBRVS) rely on recommendations by the RBRVS Update Committee (RUC).

A committee of 31 practicing physicians, the RUC has powerful sway in assigning relative value units (RVUs) to over 7,000 medical services. Fifty percent of all patient visits are to a primary care doctor, and studies consistently link access to primary care with better health outcomes. Nevertheless, generalists are only guaranteed a single seat on the RUC, and there have never been more than three generalists seated in the RUC at once. As a result of the RUC’s unrepresentative makeup, relative value units have consistently been skewed to favor specialty services.

To make matters more complicated, assigning RVUs is necessarily a zero-sum game. As services such as electrocardiograms and colonoscopies increase in value, basic services tied to primary care become less profitable. This triggers a vicious spending cycle: In a system where specialty procedures are compensated at significantly higher rates than evaluation and management services, physicians are incentivized to over-prescribe procedural services and complete fewer primary care services. Even more alarmingly, this payment structure contributes to a 48% gap in annual earnings between specialists and generalists, thus producing a strong disincentive for medical students to become PCPs. This imbalance has influences the entire U.S. healthcare system, as Medicaid and private insurers tend to follow Medicare’s lead in reimbursement practices.

"Adjusting reimbursement policies to reflect the true value of basic medical services could sufficiently realign healthcare providers’ incentives to deliver the types of care needed to boost national health outcomes. "

As a result, it should come as no surprise that the United States currently faces a severe shortage of primary care providers. Currently, 65 million Americans reside in Primary Care Professional Shortage Areas. PCP shortages are disproportionately concentrated in low-income localities, contributing to existent geographic, racial, and socioeconomic health disparities. 

While the Medicare Access and CHIP Reauthorization Act of 2015 ushered in a new era of in reimbursement structures, the fee-for-service system continues to dictate the relative values of healthcare services. Consequently, the present system also impacts the the types and amounts of services physicians provide across the country. 

Clearly, RVUs undervalue the importance of primary care on population health. If CMS continues to prioritize specialists over primary care doctors, the United States’ increasingly old and chronically ill population will grow sicker and face mounting medical costs. Meanwhile, as the dearth of primary care providers deepens, healthcare costs will further skyrocket, and the United States will face increasingly dismal national health outcomes.

It’s really a simple fix. We have the opportunity to automatically reduce healthcare costs by incentivizing the deliverables that matter. This, in turn, will encourage more medical students to pursue primary care, which could drastically improve public health in the United States.

Nevertheless, given the extent to which the American healthcare system is tied to tax rates, local economies, individuals’ livelihoods, company profits, and notions of social welfare, proposals for healthcare reform ignite explosive partisan debates. Since health expenditures constitute a significant portion of the federal budget, ideologically-rooted tensions between fairness and equality complicate budgetary allocations. Simultaneously, attempts to cut costs are politically difficult for politicians beholden to deep-pocketed private interests. Outspoken contingents of medical professionals — eager to protect their independence and incomes — are also party to the debate. Specialists who profit from the status quo will be vociferously opposed to changes in relative value units that reflect the importance of primary care while drawing from their potential earnings.

Still, 69% of Americans list health care costs as a primary concern. Perhaps this simple adjustment to the way healthcare is priced — an adjustment that dodges the necessity of any large-scale overhaul of the present system — could thus be a very attractive opportunity for either party to achieve a political win. 

Photo: “Stethoscope

About the Author

Emily Skahill '21 is a Senior Staff Writer for the US Section of the Brown Political Review. Emily can be reached at emily_skahill@brown.edu

SUGGESTED ARTICLES