Resource-based relative value scale

How Much Is Health Care Worth?

Feb 17, 2014• 18

By Paul Keckley

Higher education has a relative value problem.

The product of higher education is widely embraced in the United States: 20 million students attend our 3000 schools of higher learning.

Per the Bureau of Labor Statistics, a college grad can expect to earn 1.7-2.7 times the lifetime income of a student who finished high school and entered the workforce.

A college degree provides higher employment security: in 2012, the unemployment rate for college grads was 4.5% versus 8.3% for those with high school diplomas.

Colleges play a key role in our local communities—for economic development, workforce development and as a major employer.

And a recent Pew Research survey (February, 2014) found 9 of 10 with college degrees believe the investment has or will pay off.

Higher education does not have a value problem: its value proposition against the option of not getting a degree is solid.

But higher education has a relative value problem.

Since 1985, the price of higher education has increased 538% versus medical costs (+286%) and the consumer price index (+121%).

Stated differently, annual tuition increases have been 7.4%–more than healthcare (5.8%) housing (4.3%) and family income (3.8%). Last year, students and families paid $154 billion in tuition and fees to attend college: 60% borrowed $106 billion to help pay their bill.

In the end, 38% enrolled in four-year degree programs and 21% in two-year degree programs will not graduate on time. One in seven with student loan debt will be delinquent on their debt, and student loan indebtedness, now at $1 trillion, will shortcut household discretionary spending that might otherwise be injected in our economy. And incomes for college grads have stagnated for the past 12 years.

The perplexing question facing higher education is this: does a college degree pay? And more precisely, what is relative value of each institution’s offering given alternatives?

Rethinking The Value Of Medical Services

Aug 2, 2011• 5

By BRIAN KLEPPER & DAVID KIBBE, MD

One of American politics’ most disingenuous conceits is that health care must cost what we currently pay. Another is that the only way to make it cost less is to deny care. It has been in industry executives’ financial interests to perpetuate these myths, but most will acknowledge privately that the way we value and pay for medical services is a deep root of America’s health care cost explosion.

When the Resource-Based Relative Value Scale (RBRVS) became the framework for Medicare payment nearly twenty years ago, it equated a medical service’s “value” with four categories of physician work inputs: time, mental effort and judgment, technical skill and physical effort, and psychological stress. The assessment process, handled from the outset by the American Medical Association’s (AMA) secretive, specialist-dominated Relative Value Scale Update Committee (RUC), delineates and quantifies a service’s inputs in terms of its Relative Value Units (RVUs) which, with a monetary multiplier, define its worth.

In 1989, RBRVS’ lead architect, William Hsaio, confidently suggested that the process would be rational and reliable:

We found that physicians can rate the relative amount of work of the services within their specialty directly, taking into account all the dimensions of work. Moreover, these ratings are highly reproducible, consistent, and therefore probably valid.

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