How about a national fee schedule?

Most people don't think about payments to health care providers, but it might surprise many to realize the wide variation in what and how providers are compensated in the U.S. Each insurer, provider network or government payer pays providers differently--in methods and levels. If one were to develop an index of payments, Medicare would be at 100%, Medicaid at 50 or 60% and commercial insurers and networks at 125% or so. The method of payment also differs significantly payer to payer, with Medicare, for example, paying hospitals fixed rates for a particular hospital stay while a commercial carrier pays a percent of the charges or a daily rate per day in the hospital. This variation not only causes perverse incentives in how care is delivered it is an administrative monstrosity to track.

The administratative issues alone are mind-boggling in these schemes, but their impact on providers and patients is far more troubling. Without belaboring the point, the variation in payment to providers is unsustainable--it defies the imagination how we can continue to support a system whereby a provider is paid differntly depending upon the insurance coverage of the patient. Thus a provider doing the same procedure for a Medicare vs. a commerecial patient is paid differently even though he or she spent the same amount of time with each one. Even among commercial patients, payments differ by as much as 30 or 40 percent for the same visit length and type. This is truly nutty.

A giant step forward in the health care debate would be to establish a national fee schedule for provider payments. That would mean physicians, hospitals and other providers would be paid according to national standards and other payment systems banned. Thus all providers would be paid the same amount for a given procedure, visit or test, no matter who the insurer is paying the tab. Thus an office visit in Anywhere, U.S.A for an established patient would be $100 whether a patient was insured through Medicare, Medicaid, Blue Cross, United Health Care, Humana or a local health plan.

To accomplish this would require legislation to direct CMS or another government agency to establish a national fee schedule, which would be indexed like Medicare is today by region. While there would be enormous argument about how to set fees, once that argument was settled, the administrative cost savings for both payers and providers would be huge.

This one change would bring about fundamental reform in how we provide and pay for health care in America. It is the least disruptive, the most unobtrusive and the most profound change, short of establishing a single payer system with one benefit plan. By setting the table for reimbursement, the nation decides, like it does with transportation and communication systems, that there are some elements of basic goods and services that must be regulated. If the government regulated the rates paid to providers, it would create the right kinds of incentives for all players in health care and health administration.

I would liken a universal fee schedule to the establishment of standards for power transmission. Every power plant must abide by the same requirements to deliver electricity to a household. What one plugs into that standard amperage is up to the consumer and the businesses manufacturing products. The government has an equally compelling interest in insuring a level playing field in health care.