Physician Response to Fee Changes

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Abstract
THE PHYSICIAN Payment Review Commission, Washington, DC, has a long-standing interest in measuring physicians' response to changes in payment rates (called "behavioral offset"). A summary of our recent empirical work on this subject is included in the commission's 1993 report to Congress.1 In this issue, Escarce2analyzes Medicare claims before and after the overvalued procedure fee reductions specified in the Omnibus Budget Reconciliation Act of 1987 (OBRA 87). He purports to show that the OBRA 87 cuts generated no net behavioral offset. See also p 2513. We disagree with Escarce's conclusion: we believe the Medicare data provide good evidence of a behavioral offset. We frame herein the policy issue, identify the important methodological differences between Escarce's analysis and our own, and summarize findings from our own studies of the OBRA 87 fee reductions and subsequent policy-driven changes in Medicare fees. The issue of the behavioral offset gained broad

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