Measuring input prices for physicians: the revised Medicare Economic Index

Medicare payments for physician services under Part B were historically restrained by capping prevailing charges using the Medicare Economic Index (MEI). The MEI, an input price index for physician services that incorporates an adjustment for economywide labor productivity, has not undergone a major revision since 1975. The MEI is an important determinant of the annual volume performance standard that will be used to set aggregate increases in the revised system for paying physicians under Medicare beginning in 1992. The MEI will also be used in establishing the annual changes to the payment conversion factors under the new payment system.