Suggested Reading—Medical Price Fixing

The Washington Monthly recently published a fascinating story-fascinating in the way of horror movies. Called “The shadowy cartel of doctors that controls Medicare,” it’s about how medical provider fees are determined.

Author Haley Sweetland Edwards traces the secretive process to reach the inevitable conclusion that, essentially, the value of an MRI, a heart stent, surgical anesthesia, is a matter of price-fixing that in any other context would be illegal.

There are 31 medical members of the Specialty Society Relative Value Scale Update Committee (RUC) convened by the American Medical Association. One was an anonymous source for Edwards. That doctor described the process: “No one ever says the word ‘price.’ But yeah, everyone knows we’re talking about money.”

Their work is so secret most medical professionals have no idea what the RUC does.

RUC members send their list of “recommended values” to the Centers for Medicare and Medicaid Services, which almost never denies them. Edwards writes:

The RUC … enjoys basically de facto control over how roughly $85 billion in U.S. taxpayer money is divvied up every year. And that’s just the start of it. Because of the way the system is set up, the values the RUC comes up with wind up shaping the very structure of the U.S. health care sector, creating the perverse financial incentives that dictate how our doctors behave, and affecting the annual expenditure of nearly one-fifth of our GDP.

This screwy system means that although the prices Medicare and private insurers pay for certain procedures have increased, fees for other services have declined or stagnated. The RUC, which is dominated by specialists, spends most of its time reviewing specialty procedures, which change quickly as technology advances, rather than common treatments such as office visits, which is how primary care doctors and other generalists make a living.

This system incentivizes lucrative overtesting while basic care gets the shaft. No wonder medical specialists are proliferating as we suffer from a serious shortage of primary care practitioners.

If you have the nerve, read her full report by linking here.

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