Medicare’s New Physician Payment System.

A 2015 law has the potential to transform how Medicare pays physicians.

For more than two decades Congress and the federal government have wrestled with how to pay physicians in the Medicare program, which covers forty-seven million Americans. In 2014 Medicare paid physicians and other clinicians around $138 billion—22 percent of total Medicare spending—up from $59 billion in 2000.

The primary challenge of physician payment is determining fair fees for physicians and other clinicians. But, just as important, the challenge extends to paying physicians in a way that promotes efficient, effective, and safe care; does not incentivize excessive and unnecessary care; and fosters the judicious use of medical resources since physicians order and direct the care that constitutes the lion’s share of total Medicare spending. 

An overwhelming body of research in recent years found that medical care in the United States was neither efficient nor as effective as it could be. Inappropriate and excessive care is common even as rising health care costs burden government, business, and families. 

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