Physician payment reform: past and future

Medicare's decision to compensate physicians using a fee schedule based on the relative value of their services was an attempt to rationalize fee-for-service payment of physicians. Reformers hoped also to control the costs of care, improve its quality, and protect access to health services among Medicare beneficiaries. A close examination of the system's provisions indicates, however, that the reform does not address many fundamental problems that have plagued physician payment under Medicare in the past. In the cost area, for example, the new fee schedule does not affect such factors as the basic incentives built into fee-for-service medicine and the explosion of new medical technologies. The failure of the program to achieve its goals in cost containment and other areas could result in abandonment of fee-for-service compensation of physicians under Medicare.