Topics in valuation: Relative Value Update Committee (RUC)
June 14, 2012
Is valuation going to be the new hot topic in social studies of finance? If so, heath care and health insurance reform provide a fascinating place to study how market and non-market mechanisms of valuation are being stitched together.
In the US, a powerful professional group—the American Medical Association (AMA)—sets the billing codes that govern medical practice. As this Marketplace report explains, the AMA has a group called the Relative Value Update Committee (RUC) that is in charge of putting a price on all individual medical procedures.
The potential problems with fiat pricing by close-door committee are well known. As one RUC member admitted in the report, “Doctors end up coming in and lobbying for their own interests. Having a seat on the RUC is a pathway to do that”.
Market mechanisms of valuation claim to break up the control that specific interest groups have over value. But it’s difficult to envisage how markets could ever fully attain in medicine. Patients may end up with choices over health insurance products, but they are not in a position to determine their own needs in the bio-medical marketplace.
The medical profession’s hold over value is an important political piece of the economics of US health reform. For while government mandated medical insurance is supposed to be bought and sold in an open and competitive marketplace, the price of the medical services is still being set by a much older mechanism—the guild.