Medicare patients' use of overpriced procedures before and after the Omnibus Budget Reconciliation Act of 1987

Objectives. Under the Omnibus Budget Reconciliation Act of 1987, Medicare reduced physician fees for 12 procedures identified as overpriced. This paper describes trends in the use of these procedures and other physician services by Medicare patients during the 4-year period surrounding the implementation of the 1987 budget act. Methods. Medicare physician claims files were used to develop trends in physician-services use from 1986 to 1989. Services were grouped into four categories: overpriced procedures, other surgery, medical care, and ancillary tests. Results. Growth in the volume of overpriced procedures slowed substantially after the 1987 budget act was implemented. Moreover, the reduction in the rate of volume growth for these procedures differed little among specialties or areas. In comparison, the rate of volume growth fell modestly for other surgery, was unchanged for medical care, and increased for ancillary tests. Conclusions. Increases do not necessarily occur in the volume of surgical procedures whose Medicare fees are reduced. Although the conclusions that may be drawn from a descriptive analysis are limited, these findings suggest that concerns that the resource-based Medicare fee schedule will lead to higher surgery rates may be unwarranted.