THE LIMITS OF MARGINAL ECONOMIC INCENTIVES IN THE MEDICAID PROGRAM - CONCERNS AND CAUTIONS

In January 1985, New York State implemented legislation that allowed f or a 30 percent increase in Medicaid fees for physicians providing pri mary care services. This was intended to increase their levels of part icipation. Yet the outcome was not as expected. In upstate New York, t he number of physicians participating in Medicaid each month actually declined; in New York City, the monthly rate of increase in participat ing physicians, which was part of the overall sharp rise in all licens ed physicians, underwent a decline. Furthermore, utilization measures suggest that ''procedural upgrading'' might have become a problem in N ew York City. These results suggest that a marginal increase in New Yo rk State's low Medicaid fees will not have a positive effect on physic ian participation levels.