The Role of the RUC in Medicare's Price-Fixing and Rationing Remains Anechoic

An important part of the noisy and contentious debate about health care reform in the US centers on the role of the government as a provider of health insurance. Some on the left want a government "single-payer" plan to be the only health insurance available. Some left of center want a government "public option" health insurance plan to be available, particularly to those who have trouble obtaining commercial insurance. Some on the right want none of it, and sometimes note that the existing government single-payer plan for the elderly and disabled, Medicare, has important faults that would only become more significant if the plan is extended or duplicated. Yet even critics of Medicare on the right do not seem to want to talk about what may be its worst fault.

The latest example, an op-ed piece by Dr Scott Gottlieb, appeared in the Wall Street Journal yesterday. Dr Gottlieb's main point was that health care rationing by either government or private insurers is inevitable, but that "government does it in far more byzantine and arbitrary ways." In particular,

Consider the $450 billion Medicare program. It provides a model for—indeed its bureaucracy could well end up running—the 'public option' health plan that Mr. Obama wants to offer all Americans under the age of 65. In recent years, Medicare's staff has been aggressively restricting coverage for costly treatments.

This often means limiting access to the costliest technologies. To do this Medicare relies on its rationing and pricing systems.

Gottlieb then cited several examples, "tortured decisions concerning the use of implantable defibrillators," and "the travails of the pharmaceutical company Spracor and its drug Xopenex, an innovative respiratory medicine that competes with the chemically distinct and much cheaper generic albuterol."

Finally Gottlieb decried Medicare's decision making processes applied to costly technologies as "impenetrable." His summation was

There's nothing inherently wrong with a program like Medicare seeking value for taxpayers. But it shouldn't make up the rules as it goes.

Let me first say that I actually agree with Dr Gottlieb's main points. Any government or private health insurance plan ought to seek value for its money. However, how it does so ought to be rational, based on understanding of medicine and the clinical context, and transparent and accountable to the patients on whose behalf such plans pay. "Covert rationing" (as has been well discussed in the Covert Rationing Blog) raises worries that decisions are being made just to save money, not to improve value, and even that decisions are being made without informed consideration of the clinical context, or based on the self-interest of the decision makers, or even that decisions may result from bribery and corruption.

But if Dr Gottlieb is so concerned about Medicare rationing care as a result of opaque and unaccountable decision making, why is he not more concerned about how Medicare controls the prices of physicians' services than about its decisions about a few expensive, high-tech and infrequently used treatments?

We have written again and again about how Medicare has allowed decisions about what physicians are paid for providing various services to be made de facto by an opaque private committee run by the American Medical Association. This decision-making process has lead to relatively generous payments for procedures, versus miserly payments for "cognitive services," (that is, "evaluation and management services," or for physicians interviewing, examining, and counseling patients, making diagnoses, predicting prognoses, and making decisions about treatment.) The resulting perverse incentives are a major reason that primary care has become increasingly unavailable, and for our expensive patterns of care dominated by high-technology and invasive procedures. More detail quoted from a previous post appears below.

As we have discussed, the US Medicare system determines what it pays physicians using the Resource Based Relative Value System (RBRVS). This system determines the pay for every kind of medical encounter according to a complex formula that is supposed to account for physicians' time and effort, physicians' practice expense, and the cost of malpractice insurance. The components of physicians' effort assessed are, in turn, technical skill and physical effort; the required mental effort and judgment; and stress due to the potential risk to the patient.

To keep the system, which was started in 1990, current, requires addition of new kinds of encounters, which means encounters involving new kinds of procedures, and updating of the estimates of various components, including physicians' time and effort. To do so, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee (RUC). The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments. However, the identities of RUC members are secret, as are the proceedings of the group.

This opaque and unaccountable process has resulted in increases outstripping inflation in fees paid for procedures, while fees paid for 'cognitive" medicine,' i.e., for primary care, and for services that involve diagnosis, management of acute and chronic disease, counseling, coordination of care, etc, but not procedures, have lagged inflation. The effects of the RUC have been amplified by the unexplained tendency of commercial managed care and health insurance to track the RBRVS system when making their own payments to physicians.For further details about the RUC, see these posts on Health Care Renewal (here, here, here, here, and here) and important articles by Bodenheimer et al,(1) and Goodson.(2) By the way, why the US Center for Medicare and Medicaid Services (CMS) relies de facto exclusively on the RUC to control the RBRVS system, and why the AMA made the RUC into a secret organization apparently beholden only to the organization's proceduralist members are unanswered questions.

Our most recent posts about the RUC are here, here, and here. Other bloggers, notably including Dr Robert Centor on DB's Medical Rants, have criticized the RUC. The Society of General Internal Medicine seems to be the only medical society that has criticized the RUC (see this post). Yet even ostensibly conservative and libertarian pundits who decry price-fixing and rationing by Medicare have ignored this vivid and important example of opaque and unaccountable price-fixing and rationing. And ostensibly liberal proponents of public options and single-payer systems have not explained how they would make their rationing more rational, transparent, and accountable, or how simply insuring more patients under Medicare-like programs would not result in even higher costs, poorer access, and worse quality.

The lack of discussion of the RUC remains one of the more striking examples of the anechoic effect. Failing to address why our costs are so high, are access is so poor, and our quality is so challenged will make it likely that any supposed reform effort will only make these problems worse.

References

1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.