Regulatory Capture

Came across this fascinating & comprehensive overview of the RUC in Washington Monthly. It's on the longish side but well worth the read.

Some other great recent articles on the RUC:
Washington Post (covers most of the same issues)
KevinMD (insider view mostly defending the RUC)


Briefly, the RUC sets RVUs (relative value units) for Medicare, essentially determining how much physicians get paid for each thing that they do. The RUC is run by the AMA, and representation by each specialty is nearly equal. So like the US Senate, each specialty gets one vote. 8k urologists, 30k EM docs, and 200k IM docs = 1 vote each.

Many attribute this absurd degree that we "overvalue" (read: overpay for) procedures is due to their gross overrepresentation on the RUC. And of course, this comes at the expense of paying for other things, such as primary care.

One fundamental issue with the way the system works is that it's the Resource-Based Relative Value Scale -- RVUs (aka price) is determined by inputs. The technical details are summarized well in Wikipedia:

For each service, a payment formula contains three RVUs, one for physician work, one for practice expense, and one for malpractice expense. On average, the proportion of costs for Medicare are 52%, 44% and 4%, respectively. The three RVUs for a given service are each multiplied by a unique geographic practice cost index. The sum of the three geographically weighted RVU values is then multiplied by the Medicare conversion factor to obtain a final price.

Note again that what Medicare pays is determined by inputs only -- hence the "Resource-Based" part of RBRVS. Nothing about outputs, or what non-economists would call "outcomes" or "does this help the patient?"

And we wonder why so many patients get procedures that we know don't help them.

Acknowledgments:

Thanks to Ashish Jha, Austin Frakt & Jeffrey Flier for tweeting links to the article.

And of course Haley Sweetland Edwards for writing the article.

Quick glossary:

RBRVS: Resource-Based Relative Value Scale = Medicare's payment system that pays physicians based on RVUs

RVU: relative value unit = "a measure of value used in the United States Medicare reimbursement formula for physician services" (thanks Wikipedia!)

RUC: AMA/Specialty Society Relative Value Scale Update Committee = the committee that determines RVUs

CPT: Current Procedural Terminology = "a medical code set maintained by the American Medical Association... [which] describes medical, surgical, and diagnostic services and is designed to communicate uniform information about medical services and procedures among physicians, coders, patients, accreditation organizations, and payers for administrative, financial, and analytical purposes." (also from Wikipedia)