Mercatus Center May 24, 2023
The Medicare Physician Fee Schedule (MPFS) determines how much healthcare providers are reimbursed for the services they provide to Medicare beneficiaries, and it has considerable influence on healthcare spending in the United States. These rates, set at the federal level by the Specialty Society Relative Value Scale Update Committee (RUC), do not accurately capture the value of the services provided and create misaligned incentives by rewarding providers for delivering care on the basis of the volume and intensity of services and, conversely, by discouraging the provision of valuable but undercompensated services.
In this paper we give an overview of how Medicare sets reimbursement rates for physician services, and we discuss the major flaws in the current administrative pricing system. We...
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