RFK Jr. weighs major changes to how Medicare pays physicians

Robert F. Kennedy Jr. and his advisers are considering an overhaul of Medicare’s decades-old payment formula, a bid to shift the health system’s incentives toward primary care and prevention, said four people who spoke on the condition of anonymity to discuss private deliberations.

The discussions are in their early stages, the people said, and have involved a plan to review the thousands of billing codes that determine how much physicians get paid for performing procedures and services.

The coding system tends to reward health care providers for surgeries and other costly procedures. It has been accused of steering physicians to become specialists because they will be paid more, while financial incentives are different in other countries, where more physicians go into primary care — and health outcomes are better.

Although policymakers have spent years warning about Medicare’s billing codes and their skewed incentives, the matter has received little national attention given the challenge of explaining the complex issues to the public, the technicalities of billing codes and the financial interests for industry groups accustomed to how payments are set.

“It’s a very low-salience issue,” said Miriam Laugesen, a Columbia University professor who has written a book, “Fixing Medical Prices,” about Medicare’s physician payments. “The prominent stakeholders in this area would probably prefer to keep it that way.”

Kennedy was selected this month by President-elect Donald Trump to lead the Department of Health and Human Services and has been drawing up plans to roll out his “Make America Healthy Again” agenda, a set of ideas to reduce the causes of chronic disease and childhood illness. The position requires Senate confirmation.

A spokesperson for Kennedy did not respond to a request for comment.

Medicare’s billing codes are shaped by the American Medical Association, which represents more than 250,000 physicians. The lobbying group oversees a panel of several dozen physicians — known as the AMA/Specialty Society RVS Update Committee, more commonly referred to as the RUC — who study the resources needed for each medical service and issue recommendations to the federal government. While those recommendations are not binding, federal officials overwhelmingly accept them and use them to set reimbursement for doctors’ duties.

The panel’s recommendations have historically been skewed by misleading estimates of how physicians spend their time, according to a 2013 Washington Post investigation. For instance, the Post found that the RUC repeatedly inflated the amount of time a doctor needed to perform a procedure.

The AMA also collects millions of dollars in revenue from its work to develop and recommend billing codes, with the lobbying group conducting trainings, selling books and charging royalties.

The AMA declined to comment.

Lawmakers have spent decades questioning why physicians play a role in setting their own federal payments. Trent Lott, the Mississippi Republican who served as Senate minority leader, in 2001 took aim at the lobbying group’s influence, calling to strip the AMA’s copyright for the codes.

Senators say those concerns have persisted.

“I’ve long been concerned with this secretive AMA committee setting their own payment rates from Medicare,” Sen. Elizabeth Warren (D-Massachusetts) said in a statement to the Post on Wednesday. “It’s just plain unethical — these recommendations should be made in the best interest of patients and taxpayers, not a handful of well-connected insiders.”

Sens. Sheldon Whitehouse (D-Rhode Island) and Bill Cassidy (R-Louisiana) also have launched an effort to overhaul physician payments, asking for feedback this year on creating a federal committee — separate from the RUC — to advise on billing codes. Cassidy is the incoming chairman of the Senate health committee.

Kennedy and his aides are looking to work with the AMA on changes to the billing codes, said one of the people familiar with the discussions.

The medical association has said that some criticisms of its process are outdated and that hospitals, health insurers and other industry representatives provide input as well to Medicare that shapes payment rates for those organizations.

STAT News first reported that Kennedy and his aides were discussing changes to Medicare payments. Any federal attempt to overhaul billions of dollars in annual payments to health-care providers appears destined to spark an intense lobbying effort to stymie the changes or shift them to reward certain procedures, experts said.

The billing codes are implemented by the Centers for Medicare and Medicaid Services, commonly known as CMS. Trump on Tuesday selected Mehmet Oz, a cardiothoracic surgeon and longtime TV personality, to lead CMS.

“Our CMS codes embed a system that waits for Americans to get sick and profits,” Calley Means, a Kennedy adviser, posted Wednesday on X, commenting on Oz’s selection. If Kennedy and Oz are confirmed, they would play significant roles in reshaping the Medicare coding system.

Many public health officials and experts have been alarmed by Trump’s selection of Kennedy to lead HHS, saying his longtime vaccine skepticism makes him an unacceptable choice to oversee agencies responsible for the nation’s vaccine supply. Kennedy has repeated debunked claims about a link between vaccines and autism, written that coronavirus vaccines were a “crime against humanity” and made other statements that experts say undermine confidence in shots credited with eliminating diseases such as polio in the United States and saving millions of lives globally.

“I think the most dangerous thing about the nominee for secretary is his view on vaccines,” Kathleen Sebelius, who served as HHS secretary during the Obama administration, told CNN this week. “That is enormously dangerous and life-threatening for people in this country and across the globe.”

Kennedy, who founded a prominent anti-vaccine group, has said he is not anti-vaccine and would focus federal vaccine efforts on conducting additional research.

He and his allies have said the former Democrat is trying to shake up incentives that produce poor health outcomes in the U.S. health system, citing elevated rates of chronic disease and other public health problems that outpace other high-income countries. Kennedy and his aides have pinned some of the blame on entrenched industry groups, including the pharmaceutical industry, and criticized conflicts of interest between drugmakers and physicians.

“There is a culture of looking at all levers of our healthcare system with fresh eyes to deliver wins for the American people,” a person with knowledge of the discussions wrote in a text message to the Post.

A variety of groups and observers have long called for changes in how Medicare pays physicians.

The Government Accountability Office, a nonpartisan watchdog, in 2015 called for more transparency around how physician payment rates are set and warned of potential conflicts of interest among the AMA physicians who make recommendations.

“It is clear that the RUC process is broken and that the AMA has no interest in even minor changes,” the Center for American Progress, a left-leaning think tank, wrote in 2018.

“This cabal wields its influence to favor costly specialty care over primary care, and the prices of physician services skyrocket, year after year,” Joe Lonsdale, a Silicon Valley entrepreneur and Republican donor, wrote in 2019.