Medicare fees for physician services are resource-based

Beginning January 1, 1992, Medicare has relied on a resource-based relative value scale (RBRVS) to establish physician fees. Medicare pays 80 percent of the lower of the amount a physician bills for the service or the fee schedule amount. The patient is responsible for the remaining 20 percent, as well as the annual Part B deductible of $100, plus any additional amount the physician may be allowed to bill. Rarely is the billed amount below Medicare's fee schedule amount. Adoption of the RBRVS fee schedule severed the link between the amount a physician charged for a service and the amount Medicare paid for it. RBRVS implementation required significant changes in the coding system used to document and bill physician services, particularly medical visits and consultations.