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Physician behavioral response to a Medicare price reduction
1Infrastructure Capital Group, Washington, DC, USA.
Health Services Research
|August 1, 1997
Summary
Physicians partially offset Medicare fee cuts by increasing patient visit volume, recouping about 40 cents for every dollar reduced. This physician behavioral response indicates price controls alone are insufficient for healthcare cost containment.
Area of Science:
- Health Economics
- Medical Practice Management
- Healthcare Policy
Background:
- The Omnibus Budget Reconciliation Act of 1989 mandated Medicare fee reductions.
- Understanding physician behavioral responses to these changes is crucial for healthcare cost management.
Purpose of the Study:
- To investigate physician behavioral responses to Medicare fee reductions at the individual practice level.
- To model and analyze symmetric and nonsymmetric behavioral responses.
Main Methods:
- Utilized Medicare Part B Annual Data (BMAD) Provider Files for 1989-1990.
- Employed a fixed-effects model within carrier and specialty.
- Calculated volume and pricing data using Fisher indexes of change.
Main Results:
- Observed nonsymmetric behavioral responses; practices with no fee reductions showed no change.
- Physicians experiencing fee reductions partially compensated by increasing service volume.
- For every dollar reduction in fees, physicians recouped approximately 40 cents through increased volume, with variations by specialty.
Conclusions:
- Physician volume response indicates that Medicare price controls alone are insufficient to curb rising healthcare costs.
- Additional or alternative cost containment strategies are necessary to achieve healthcare cost containment goals.