Health and Human Services Secretary Louis W. Sullivan has sent Congress a preliminary outline of a plan that will change the way physicians are paid by the Medicare program.
The package includes a preliminary fee schedule covering about 1,400 physician services, shifting payments to primary care and away from procedure-based services such as surgery.
Under the new system, physician fees will be based on the time, skill level and resources needed to perform the service, as well as practice costs and malpractice insurance costs.
More than 500,000 physicians will be affected by the change scheduled to be implemented Jan. 1, 1992. It will be the largest change in the Medicare program since its inception 25 years ago.
In his letter to health committee and subcommittee chairmen and ranking members, Sullivan cautioned that the numbers in the fee schedule are "very preliminary. . . . Many and perhaps all of these values will change."
"Important policy and technical questions . . . are unresolved," he added.
Under the current Medicare system, physicians are paid their actual charge, customary charge
or the prevailing local charge for a service,
whichever is lowest. The system has resulted in large variations in payments among localities and services.
The new system will pay physicians either the actual charge or a fee based on the value scale, whichever is lower.
A geographic adjustment will account for differences in practice costs, but overall payments will increase for many physicians in rural areas who are paid less than urban physicians under the current system.