Measuring input prices for physicians: the revised Medicare Economic Index

Area of Science:

• Health Economics
• Public Policy
• Medical Economics

Background:

• Medicare Part B historically capped physician service charges using the Medicare Economic Index (MEI).
• The MEI, an input price index for physician services, includes an adjustment for economywide labor productivity.
• The MEI has not been significantly revised since 1975.

Purpose of the Study:

• To highlight the critical role of the MEI in determining Medicare physician payment systems.
• To underscore the importance of the MEI's upcoming use in the revised physician payment system starting in 1992.
• To emphasize the MEI's function in setting annual changes to payment conversion factors.

Main Methods:

• Analysis of the historical role of the Medicare Economic Index (MEI) in Medicare physician payments.
• Examination of the MEI's components, including its adjustment for economywide labor productivity.
• Review of the MEI's significance in the context of the impending 1992 Medicare physician payment reform.

Main Results:

• The MEI has been a primary tool for restraining Medicare payments for physician services.
• The MEI's structure, unchanged since 1975, influences the volume performance standard for aggregate payment increases.
• The MEI is integral to the new physician payment system, affecting annual adjustments to payment conversion factors.

Conclusions:

• The Medicare Economic Index (MEI) is a foundational element in Medicare physician payment policy.
• The MEI's long-standing structure necessitates consideration for future revisions to accurately reflect economic changes.
• The MEI's role in the upcoming 1992 payment system underscores its continued importance in physician reimbursement.