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Abstract:
The Omnibus Budget Reconciliation Act of 1989 (OBRA '89) eliminates Medicare's "reasonable charge" method of reimbursing physicians, replacing it with a fee schedule based on a relative value scale. The new payment system's major goals are to decrease Medicare's long-term spending growth rate for physician services and to divide Medicare physician payments more equitably. The two major components of the fee schedule are a relative value scale and a conversion factor. With adjustments to accommodate geographical variations in practice costs, Medicare will pay the lower of (1) a physician's actual charge for service or (2) the fee schedule amount. The nucleus of the fee schedule will be a resource-based relative value scale (RBRVS), which is intended to reflect the costs efficient physicians are expected to incur when providing a service. OBRA '89 directs the Health and Human Services (HHS) secretary to review the RBRVS at least once every five years. The conversion factor, which the HHS secretary may calculate separately for all physician specialties combined or for groups of specialties, will initially be based on 1991 aggregate Medicare spending. Thereafter a formula will be used to update the fee schedule each year. Another feature of OBRA '89 will be a cap on fees charged by physicians who do not participate in Medicare. Because a number of tasks remain to be completed before RBRVS can be implemented, OBRA '89 provisions may be delayed. There is even a remote possibility that the new payment system may not be implemented.
Insights
The Omnibus Budget Reconciliation Act of 1989 (OBRA '89) replaces Medicare's physician reimbursement with a fee schedule. This new system aims for equitable payments and controlled spending growth.
Area of Science:
- Health Policy
- Medical Economics
Background:
- Medicare previously used a "reasonable charge" method for physician reimbursement.
- The Omnibus Budget Reconciliation Act of 1989 (OBRA '89) mandated a shift in physician payment systems.
Purpose of the Study:
- To introduce a new Medicare physician payment system based on a fee schedule.
- To control long-term spending growth for physician services.
- To ensure more equitable distribution of Medicare physician payments.
Main Methods:
- Implementation of a fee schedule comprising a resource-based relative value scale (RBRVS) and a conversion factor.
- Payment set at the lower of the physician's actual charge or the fee schedule amount, with geographic cost adjustments.
- Mandated review of the RBRVS by the Health and Human Services (HHS) secretary every five years.
Main Results:
- The RBRVS is designed to reflect the costs incurred by efficient physicians for services.
- The conversion factor initially based on 1991 aggregate Medicare spending, with annual formulaic updates.
- Introduction of a fee cap for non-participating physicians in Medicare.
Conclusions:
- The OBRA '89 payment system aims to reform Medicare physician reimbursement.
- Potential delays in implementation exist due to outstanding tasks.
- There is a possibility of non-implementation of the new payment system.