Relative value scales and usual and customary fees came into the forefront. Relative value scales were developed as a means of price controls. A value of the time required for certain medical procedures was multiplied by a complexity value. Thus, a fee was established for each code developed to describe the service provided by a doctor for medical services-both surgical and medical. Each particular service, procedure, or doctor visit has a particular code. This relative scale could then be used to determine physician reimbursement.
It was initially used for such things as workman's compensation reimbursement to physicians. Some insurance companies then also adopted similar relative value scales for medical care from doctors. The values in most cases always reduced payments because that was the goal. The amounts were arbitrary at best. The goal was however to reduce costs for insurance companies, therefore improve the insurance companies profits.
The other “fee schedules” were those called “usual and customary fees”. These were also set up to reduce payments. These were supposedly a calculation for the area's charges for the same procedure codes by all of the doctors in the area. These were averaged out over some period of time in the past and the number was set as reimbursement. The numbers were, as you can expect less than doctors were charging, but with verbiage written into doctors' contracts with insurance companies, there was usually little a physician could do about changing the amount determined as usual and customary.
Predictably, each year usual and customary fees decreased. Recently within the last 5 years, the usual and customary fees approached Medicare reimbursement. Prior to that time Medicare reimbursement was substantially less than for private insurance. If you have ever looked at your explanation of benefits (EOB) from your insurance company, I am sure you saw a large write off by the doctor which are not reimbursed. It is not that the doctors charged too much, but that systematically the insurance companies paid less for the same charges.
The processes of decreasing payments was ongoing, but it was not enough for the insurance companies. The development of the HMO arose. The intent of the HMO was that each primary care provider would regulate referrals to specialists. I sat on the sidelines with other doctors who said, “patients would not tolerate not being allowed to see a doctor without permission.” The medical community did not believe that the patient would tolerate walking into a specialists office and being turned away because there was not a referral to the specialist.
The patients however tolerated having to take a day off of work to see the doctor, getting to the doctor's office, and being turned away without seeing the doctor. The reason was that the patient did not have to pay for the office visit. The alternative was to pay for the doctor's appointment out of the patient's own pocket. To make sure that the patient could not be seen that day while the patient waited for a referral, some insurance companies themselves had to approve the visit and to send the referral from the insurance company. In some cases the approval would require 3-5 days.
Why did I say that in some way the state of healthcare was the patient's fault? The public tolerated this because the immediate out-of-pocket expense for the doctor visit was a co-pay only. They accepted it to avoid having to pay for the office visit. In reality most patients pay more for their doctors visit than their insurance company pays. Most people never even call their insurance company to complain.
The result was that the insurance companies have almost total control of health care. This is trying to be changed by the Federal Government. The Government wants to have control. When the insurance companies understood that they could limit care with only a whisper of complaints, they then set out for the next huge change-you pay most of your health care out of your own pocket. Have you not noticed that the cost of insurance is rising while at the same time your out of pocket expenses in many cases have become almost as much as the cost of the insurance?
My explanation will be forthcoming.
