How do Medicare physician fees compare with private payers?

Under the new fee schedule, Medicare physician fees are 76 percent of private fees. Consistent with the intent of payment reform, Medicare physician fees more closely approximate private fees for visits (93 percent) than for surgery (51 percent) and in rural areas as compared with large metropolitan areas. Variation in private fees across the country is considerably greater than it is for Medicare fees. Consequently, Medicare fees are most generous in areas that compare least favorably with the private market because private fees in these areas are well above average. These results shed light on the impact of the fee schedule and on the implications of using Medicare payment methods as part of a broad-based health reform.