Medicare fee schedule in place.

The Omnibus Budget Reconciliation Act of 1989 (OBRA '89) eliminates Medicare's "reasonable charge" method of reimbursing physicians, replacing it with a fee schedule based on a relative value scale. The new payment system's major goals are to decrease Medicare's long-term spending growth rate for physician services and to divide Medicare physician payments more equitably. The two major components of the fee schedule are a relative value scale and a conversion factor. With adjustments to accommodate geographical variations in practice costs, Medicare will pay the lower of (1) a physician's actual charge for service or (2) the fee schedule amount. The nucleus of the fee schedule will be a resource-based relative value scale (RBRVS), which is intended to reflect the costs efficient physicians are expected to incur when providing a service. OBRA '89 directs the Health and Human Services (HHS) secretary to review the RBRVS at least once every five years. The conversion factor, which the HHS secretary may calculate separately for all physician specialties combined or for groups of specialties, will initially be based on 1991 aggregate Medicare spending. Thereafter a formula will be used to update the fee schedule each year. Another feature of OBRA '89 will be a cap on fees charged by physicians who do not participate in Medicare. Because a number of tasks remain to be completed before RBRVS can be implemented, OBRA '89 provisions may be delayed. There is even a remote possibility that the new payment system may not be implemented.