Ask most people to name who sets medical procedure prices and nearly everyone pauses before incorrectly responding with “insurance companies.” Nothing about health care is so simple that there could be one answer, but the much more correct place to start is with the RUC, and growing awareness of this fact is starting to cause a ruckus.
The Relative Value Scale Update Committee or RUC is an American Medical Association decision-making body of 31 doctors who meet three times a year and play a significant role in determining what they and their peers will be compensated for their work. On the one hand, who better to consult regarding what work needs to be done and at what cost? On the other hand, in other circumstances don’t they frown on this kind of thing?
Point of procedure: the RUC only recommends to the Centers for Medicare and Medicaid Services (CMS) what should be charged. Point of fact: last month a Health Affairs study found that CMS accepts the RUC’s recommendations nearly 90 percent of the time (the AMA says 95 percent of the time). Point of reality: beyond CMS there are endless negotiations by insurance companies and numerous federal and state entities, including Congress. Nobody sets health care procedural prices. That said, the RUC does put the anchor in the ground first (see Know-It-Alls) and exerts enough perceived influence that even the FTC weighed in on the arrangement. (They declined to find fault with it.)
Chalk it all up to another way in which health care lacks the free-market characteristics that many would like to count on in order to reform it. If the way we set prices is broken, let’s fix it. If it ain’t, let’s not. Regardless, don’t pretend to treat health care like a typical business when – in so many ways – it is not.