Traditional "fee-for-service" (FFS) Medicare -- which pays providers a fee for each service delivered -- is the nation's largest health-insurance program, enrolling 38.1 million aged and disabled beneficiaries in 2014. The program pays more than 200 million claims for inpatient hospital admissions and home-health-care visits each year, and 1 billion claims for doctors' services. There are about 10,000 different services for doctors alone, and each of these fees is set through an administrative process that attempts to discern the cost of producing that service -- called the "relative value" -- in terms of the costs of physician work, practice expenses, and liability insurance.
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