Medicare Physician Compensation Public Policy


Would Congressman Ryan’s proposal solve this problem?

Medicare Part B pays outpatient physicians according to the billed Current Procedural Terminology (CPT) codes, which differ in procedure and intensity….Using nationally representative data from the 2001 to 2003 Medicare Current Beneficiary Survey, this paper…finds strong evidence that these fee differentials influence physician’s coding choice for billing purposes across a variety of specialties. For general office visits, Medicare outlays attributable to upcoding may sum to as much as 15% of total expenditures for such visits.

Likely no. For physicians paid by private insurers, they would still have an incentive to upcode. It is possible that private insurers may be better at policing upcoding, but their extra vigilience may also cause physicians to hesitate from providing necessary services since they fear they’ll be targeted for upcoding. On the other hand, for integrated managed care organizations like Kaiser Permanente, they have the opposite incentive. These providers are rewarded for reducing cost and thus insurers may claim to have providers services they did not in fact perform.

Although privatizing Medicare and/or Medicaid could solve some problems, upcoding is not likely to be one of them.

1 Comment

  1. The brief paragraph cited here on Upcoding does not even hint at the enormous importance of this phenomenon.

    Medicare has been cutting or at least freezing its fees for over a decade on many aspects of Part A and Part B — and yet spending per-patient increases relentlessly.

    As a fee for service plan, Medicare is crippled with an open-ended, self-reporting, highly graduated fee schedule. A complex-coded office visit generates over twice the revenue versus a simply-coded visit. A complex heart surgery generates about seven times the hospital revenue as a simply-coded pneumonia episode. An entire consulting industry shows hospitals and clinics how to make money off Medicare through upcoding.

    George Halvorson described this beautifully way back in 1996 in his book Strong Medicine. Joseph White has also discussed this in detail.

    The solution is an utterly flat fee schedule, with ratcheting to control utilization. For example, Hospitals would be paid a flat per diem per day of care, whether they did eight blood tests, an EKG, an MRI, or just had the patient rest all day.

    Days of care above a maximum would be paid out at 10% of the fee schedule, to prevent the warehousing of patients for revenue purposes.

    Germany did this for a number of years. The Japanese frankly admit that the secret of medical cost control consists of ‘mole-bashing.’

    Bob Hertz
    Director, The Health Care Crusade

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