--- title: "Vol. responses: Medicare paymt reduced with multiple payers. | Sutter Health" description: "Fixing one payer's reimbursement policy is at best a partial solution to cost containment. MD responses to reduced Medicare payments can be quite complex." url: "https://www.sutterhealth.org/research/publications/vol-responses-medicare-paymt-reduced-many-payers-1055312302" --- 1. [Home](https://www.sutterhealth.org/) / 2. [Research](https://www.sutterhealth.org/research) / 3. [Research publications](https://www.sutterhealth.org/research/publications) / 4. Vol. responses: Medicare paymt reduced with multiple payers. # Volume responses to Medicare payment reductions with multiple payers: a test of the McGuire-Pauly model. Tai-Seale M, Rice TH, & Stearns SC. _Health Econ. 1998 May;7(3):199-219._ 1998-05-01 ## Abstract The effects of changing financial incentives on physician's practice behaviour have long been of interest to researchers and policy makers. We test a model of physician volume response within the context of multiple payers developed by Thomas McGuire and Mark Pauly. A panel data set covering discharges from about 200 hospitals in the US over 45 months is used to carry out the empirical investigation. A fixed-effect model with generalized least squares and instrumental variable specifications is used to compute empirical evidence of volume responses from eight specialties experiencing varying degrees of Medicare payment reductions following the implementation of Omnibus Budget Reconciliation Acts of 1989 and 1990. The empirical findings are compared with McGuire and Pauly's simulated predictions. We note that in examining physician responses to Medicare payment reductions in the context of a multi-payer environment, it becomes evident that only fixing one payer's reimbursement policy is at best a partial solution to cost containment. We echo observations made by other analysts that physician responses to payment changes can be quite complex. Physicians do not all respond to payment reduction in the same way. [PubMed abstract](https://www.ncbi.nlm.nih.gov/pubmed/?term=tai-seale%2C+rice%2C+1998) ## Research topics - [Aging and Longevity](https://www.sutterhealth.org/research-search-results?query=%22%5C%22Aging+and+Longevity%5C%22%22) - [Health Policy](https://www.sutterhealth.org/research-search-results?query=%22%5C%22Health+Policy%5C%22%22) - [Medical Informatics](https://www.sutterhealth.org/research-search-results?query=%22%5C%22Medical+Informatics%5C%22%22) ## Related publications [View all publications](https://www.sutterhealth.org/research-search-results?verticalKey=research_publication) - Publication ### [A tale of two bounties: the impact of competing fees on physician behavior.](https://www.sutterhealth.org/research/publications/impact-competing-fees-md-behavior-1055312609) Rice T, Stearns SC, Pathman DE, DesHarnais S, Brasure M, Tai-Seale M. J Health Polit Policy Law. 24(6):1307-30. 1999 Dec 01 - Publication ### [Patient experiences in selecting a Medicare Part D prescription drug plan.](https://www.sutterhealth.org/research/publications/pt-experiences-selecting-medicare-part-d-rx-drug-plan-1055312300) Stults CD, Baskin AS, Bundorf MK, Tai-Seale M. J Patient Experience. https://doi.org/10.1177/2374373517739413 2017 Nov 21 - Publication ### [Medicare annual preventive care visits: use increased among fee-for-service patients, but many do not participate.](https://www.sutterhealth.org/research/publications/medicare-preventive-care-in-fee-for-svce-pts-1055312874) Chung S, Lesser LI, Lauderdale DS, Johns NE, Palaniappan LP, Luft HS. Health Aff (Millwood). 34(1):11-20. doi: 10.1377/hlthaff.2014.0483. 2015 Jan 01 - Publication ### [Policy-oriented research on improved physician incentives for higher value health care.](https://www.sutterhealth.org/research/publications/improved-md-incentives-higher-value-healthcare-1055312438) Luft HS. Health Serv Res. doi: 10.1111/1475-6773.12423. \[Epub ahead of print\] 2015 Nov 17 - Publication ### [Online consent enables a randomized, controlled trial testing a patient-centered online decision-aid for Medicare beneficiaries to meet recruitment goal in short time frame.](https://www.sutterhealth.org/research/publications/online-consent-for-rct-hastens-recruitment-1055312719) Meehan A, Bundorf MK, Klimke R, Stults CD, Chan AS, Pun T, Tai-Seale M. J Patient Exp. 7(1):12-15. doi: 10.1177/2374373519827029. Epub 2019 Nov 26. 2020 Feb 01 [View all publications](https://www.sutterhealth.org/research-search-results?verticalKey=research_publication) ```json {"@context":"https://schema.org","@type":"MedicalOrganization","name":"Sutter Health","@id":"https://www.sutterhealth.org/#medicalorganization","url":"https://www.sutterhealth.org","logo":"https://www.sutterhealth.org/static/images/sutter-health-logo.svg","address":{"@type":"PostalAddress","streetAddress":"2200 River Plaza Drive","addressLocality":"Sacramento","addressRegion":"CA","postalCode":"95833","addressCountry":"US"},"areaServed":{"@type":"AdministrativeArea","name":"California"},"sameAs":["https://www.facebook.com/SutterHealth","https://www.instagram.com/sutterhealth/","https://x.com/SutterHealth","https://www.youtube.com/sutterhealth","https://www.linkedin.com/company/sutter-health","https://en.wikipedia.org/wiki/Sutter_Health"]} ``` ```json {"@context":"https://schema.org","@type":"BreadcrumbList","@id":"https://www.sutterhealth.org/research/publications/vol-responses-medicare-paymt-reduced-many-payers-1055312302#breadcrumblist","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https://www.sutterhealth.org/"},{"@type":"ListItem","position":2,"name":"Research","item":"https://www.sutterhealth.org/research"},{"@type":"ListItem","position":3,"name":"Research publications","item":"https://www.sutterhealth.org/research/publications"},{"@type":"ListItem","position":4,"name":"Vol. responses: Medicare paymt reduced with multiple payers."}]} ``` ```json {"@context":"https://schema.org","@type":"MedicalScholarlyArticle","@id":"https://www.sutterhealth.org/research/publications/vol-responses-medicare-paymt-reduced-many-payers-1055312302#medicalscholarlyarticle","name":"Volume responses to Medicare payment reductions with multiple payers: a test of the McGuire-Pauly model.","headline":"Vol. responses: Medicare paymt reduced with multiple payers.","abstract":"The effects of changing financial incentives on physician's practice behaviour have long been of interest to researchers and policy makers. We test a model of physician volume response within the context of multiple payers developed by Thomas McGuire and Mark Pauly. A panel data set covering discharges from about 200 hospitals in the US over 45 months is used to carry out the empirical investigation. A fixed-effect model with generalized least squares and instrumental variable specifications is used to compute empirical evidence of volume responses from eight specialties experiencing varying degrees of Medicare payment reductions following the implementation of Omnibus Budget Reconciliation Acts of 1989 and 1990. The empirical findings are compared with McGuire and Pauly's simulated predictions. We note that in examining physician responses to Medicare payment reductions in the context of a multi-payer environment, it becomes evident that only fixing one payer's reimbursement policy is at best a partial solution to cost containment. 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