Physician compensation in the United States

The way that physicians get paid in the United States has changed quite a bit over the years.

For example, a long time ago, doctors got paid directly by patients - which was no different than how you might pay a mechanic today.

It was a fee-for-service system, which meant that the more a doctor did for you, the more you paid. But unlike a car, folks can’t walk away from bad health, and that’s where the private insurance company stepped in.

And for those without private insurance there were government funded insurance options - like Medicare, which covers the elderly, and the Children's Health Insurance Program, or CHIP, which covers children.

Doctors who took care of patients with Medicare or CHIP got paid a set amount according to a fee schedule.

For example, taking out a child’s tonsils might have earned a doctor $200, but actually collecting that money meant navigating a few different systems and filling out forms.

Doctors had to use the physician quality reporting system, known as PQRS, to document how they cared for a patient, and then they had to use the value-based modifier system to show that the quality of care was aligned with the cost of care.

Finally, doctors had to make sure that they were appropriately documenting everything into the electronic health records, or EHRs, according to the meaningful use system.

Having three completely different systems made it hard for a doctor to get paid because each system had it’s own reporting system, and not only that, there was a combined 9% penalty among all three programs for “low-performing” doctors, which are those who didn’t meet program standards.

It would be like working hard for two weeks, and then having to fill out three completely different forms about what you did and why you did it, so that three different groups could pay you a small part of your overall paycheck, and then getting paid less, for not completing the forms the right way.

Needless to say, doctors were annoyed.

In 2015, the U.S. Congress passed legislation called the Medicare Access and CHIP Reauthorization Act called MACRA for short.

MACRA set new expectations for a doctor’s performance as they care for Medicare or CHIP patients, through the Quality Payment Program, or QPP, which was a new program established to pay doctors.

The program starts to track how a doctor performs in 2017, and that will affect how doctors get paid in 2019.

QPP set up a system of sticks and carrots.

Doctors who get a high quality score are eligible to get bonuses that increase from 4% in 2019 all the way to 9% in 2022, and doctors with a low quality score get penalties of the same size.

Now in addition to how much doctors get paid, there’s also the issue of what they get paid to do.

The current system is generally thought of as a pay-for-volume system where you get paid for doing something. Start an IV line - $120, prescribe antibiotics - $45, and so on.