The historic payment system for reimbursing hospitals both by insurers and by Medicare
has been Retrospective Cost Based Reimbursement(RCBR). This system of reimbursement
encourages hospitals to over charge in order to cover the costs of the uninsured who utilize the
hospital. Charges have continued to rise year after year eventually putting the employers at a point
where they could no longer afford the payments.
For physician reimbursements, both insurers and Medicare employed the Usual and
Customary(U+C) approach to reimbursement. This practice, which averaged the charges for a
procedure in a region, also encourages doctors to over-charge in order to raise the average amount
paid to them for a procedure. These two systems, RCBR and U+C eventually started to suck too
much money out of the insurers, employers, and the Medicare/Social Security trust fund so that
interventions were deemed necessary.
Perhaps the biggest intervention adopted by......
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