PHYSICIAN BEHAVIORAL-RESPONSE TO A MEDICARE PRICE REDUCTION

Objective. To investigate at the individual practice level physician b ehavioral responses to the Medicare fee reductions mandated in the Omn ibus Budget Reconciliation Act of 1989. Symmetric and nonsymmetric beh avioral responses are modeled and investigated. Data Sources. Volume i ndex calculated from data in the Part B Medicare Annual Data (BMAD) Pr ovider Files for 1989 and 1990. The pricing data are from the Procedur e Files. Study Design. A fixed-effects model in carrier and in special ty is employed. Data Collection. No direct data collection is required as BMAD files are used in the study. Price and volume variables are e xpressed as Fisher indexes of change. Principal Findings. 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 ever y dollar cut in their fees, physicians recoup approximately 40 cents b y increasing volume. Loser behavioral responses vary by specialty. Con clusions. The presence of a volume response suggests that price contro l alone is not sufficient to cap rising healthcare costs. This indicat es that additional or other tools must be considered if cost containme nt is to be attained.