Physician behavioral response to a Medicare price reduction.
OBJECTIVE
To investigate at the individual practice level physician behavioral responses to the Medicare fee reductions mandated in the Omnibus Budget Reconciliation Act of 1989. Symmetric and nonsymmetric behavioral responses are modeled and investigated.


METHODS
Volume index calculated from data in the Part B Medicare Annual Data (BMAD) Provider Files for 1989 and 1990. The pricing data are from the Procedure Files.


METHODS
A fixed-effects model in carrier and in specialty is employed.


METHODS
No direct data collection is required as BMAD files are used in the study. Price and volume variables are expressed as Fisher indexes of change.


RESULTS
The results show nonsymmetrical behavioral response because practices that did not face significant fee reductions do not exhibit behavioral change. By contrast, losers partially compensate for the fee reductions. For every dollar cut in their fees, physicians recoup approximately 40 cents by increasing volume. Loser behavioral responses vary by specialty.


CONCLUSIONS
The presence of a volume response suggests that price control alone is not sufficient to cap rising healthcare costs. This indicates that additional or other tools must be considered if cost containment is to be attained.
Nguyen
N X
NX
Infrastructure Capital Group, Washington, DC, USA.
Derrick
F W
FW
D003363:Cost Control; D004470:Economics, Medical; D005251:Fees, Medical / Q000592:standards* / Q000639:trends; D006302:Health Services Research; D006801:Humans; D016345:Medicare Part B / Q000706:statistics & numerical data*; D018803:Models, Economic; D015284:Physician Payment Review Commission; D010818:Practice Patterns, Physicians' / Q000191:economics* / Q000706:statistics & numerical data; D013038:Specialization; D014481:United States