Alternative volume performance standards for Medicare physicians' services.

The Omnibus Budget Reconciliation Act of 1989 (OBRA89) established volume performance standards (VPSs) as a key element in Medicare physician reform. This policy requires making choices along three dimensions: the risk pool, the scope and nature of the standard, and the application of the standard. VPSs have most effectively controlled expenditures and changed physician behavior when they use states as the risk pool, are composed entirely of Medicare Part B services, and establish per capita utilization targets. The institution of separate standards for voluntarily formed physician groups would pose substantial administrative challenges and has the potential to effect adverse outcomes. Instead, Congress should continue to encourage prepaid plans for the purpose of lowering health care use. Under current law, VPSs will be used to adjust future price increases. Congress may not wish to emulate the example of countries that have imposed expenditure ceilings to control costs unless the current method of using VPSs proves unsuccessful.