Physician response to Medicare fee reductions: changes in the volume of coronary artery bypass graft (CABG) surgeries in the Medicare and private sectors

J Health Econ. 1998 Dec;17(6):675-99. doi: 10.1016/s0167-6296(98)00024-1.


The demand inducement hypothesis predicts that physicians will respond to reductions in their income by increasing the volume of their services when the income effect is strong and negative. I test for such inducement in the market for coronary artery bypass grafting (CABG), using a longitudinal panel of physicians in New York and Washington states. The results show that physicians whose incomes were reduced the most by Medicare fee cuts performed higher volumes of CABGs, and they did so in both the Medicare and private markets.

Publication types

  • Research Support, Non-U.S. Gov't
  • Research Support, U.S. Gov't, P.H.S.

MeSH terms

  • Coronary Artery Bypass / economics
  • Coronary Artery Bypass / statistics & numerical data*
  • Fee Schedules*
  • Fees, Medical / statistics & numerical data
  • Health Policy
  • Health Services Needs and Demand / economics*
  • Health Services Needs and Demand / statistics & numerical data
  • Humans
  • Income
  • Insurance, Health, Reimbursement
  • Medicare Part B / economics*
  • Models, Econometric
  • New York
  • Practice Patterns, Physicians' / economics*
  • Practice Patterns, Physicians' / statistics & numerical data
  • Practice Patterns, Physicians' / trends
  • United States
  • Washington