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June 1, 1994


JAMA. 1994;271(21):1663-1665. doi:10.1001/jama.1994.03510450035019

The past decade—from Medicare fee freezes in 1984 to the debate over health system reform today—has focused attention on how payment policies influence physicians' practices.

Prior to 1989, when Congress passed legislation reforming Medicare physician payment, physicians' real income (corrected for inflation) consistently increased at a rate greater than that of average US workers.1 From 1982 to 1989, physicians' real income increased 24% while the income of other workers increased 9%.2 In the Medicare program, the largest component of the increase in income was because of greater volume and intensity of physician services. For example, growth in volume and intensity accounted for 41% of the 8.2% annual increase in inpatient allowed charges by physicians, whereas increased case-mix complexity accounted for 27% and increases in price accounted for 31%. Growth in volume and intensity was especially important in cardiology, gastroenterology, and some other medical specialities, where allowed charges increased