medical vignettes.^35 This led to the “resource-based relative value scale”
(RBRVS), paving the way for 1989 legislation that formalized a physician
fee schedule based on RBRVS (with “geographic adjustors for variations
in labor costs, malpractice premiums, and the [cost of office space]”).^36
Forever gone would be the old notion of fat cat hospitals and doctors
tugging on Uncle Sam’s purse strings, whimsically charging usual or
customary fees for services.
Medicare-initiated innovations like DRGs and RBRVS have been
adopted by the private insurance sector, and further, when hospitals and
physicians negotiate with not-for-profit and for-profit carriers, their rates
are based upon a particular Medicare fee schedule year (a physician might
say, “our new Cigna contract is 135% of 2015 Medicare”). Although
Medicare accounts for “about 20% of total national health spending, at
$572.5 billion of a total of $2.793 trillion,”^37 it is the power broker in
payment reform for both public and private healthcare spending. More
recently, Congress has attempted to corral physician costs on a global
scale, setting a target for overall Medicare spending linked to the growth
of the Gross Domestic Product (GDP). Utilizing this calculated “Volume
Performance Standards” (VPS), the program stipulates a reduction in
physician fees in the present year if the previous year witnessed a budget
excess. While this Draconian arrangement, the Sustainable Growth Rate
(SGR) system, should be easy (and powerful) to implement, it is one of the
last frontiers where physicians have exercised legislative influence, and
the “doc fix” has rarely been activated. Disregarding the SGR has almost
become an annual congressional rite of passage in DC, and some have
criticized the near-perpetual state of abeyance of the SGR as a
contributing factor in the “unsustainable” increase in healthcare spending.
Medicare accounts for one-seventh of total federal spending: about
$588 billion of the $3.9 trillion budget funded Medicare in 2016.^38 In its
fifty years, the percentage of the federal budget spent on Medicare has
steadily increased, topping over 15 percent in 2016 (and 3.2 percent of
GDP), and projected to surpass 16 percent of the budget and 3.6 percent of
GDP by 2024. Between 2010 and 2050, the population over sixty-five will
double, from about forty million to eighty-four million people, and a large
tranche of that group will be seniors over eighty, who are typically very
expensive to care for. Uwe Reinhardt posits, “The current debate on US
fiscal policy clings to the notion that the fraction of overall government