IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfe/2020-63.html
   My bibliography  Save this paper

The Consequences of Medicare Pricing: An Explanation of Treatment Choice

Author

Abstract

Primary care physicians (PCPs) provide more specialty procedures in less-urban areas, where specialists are fewer. Using a structural random-coefficient model and the demographic and time variation in the data, this paper shows that changes in policy-set reimbursements lead to a reallocation of the suddenly-more-remunerative procedures away from specialists and toward PCPs, and this effect is stronger, the more rural an area is. A reimbursement-unit increase for a given procedure leads to outside-metro PCPs gaining 7-15% market share more than metro PCPs in that procedure, at the expense of specialists. Small metropolitan areas and very rural areas are the most affected.

Suggested Citation

  • Elena Falcettoni, 2020. "The Consequences of Medicare Pricing: An Explanation of Treatment Choice," Finance and Economics Discussion Series 2020-063, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2020-63
    DOI: 10.17016/FEDS.2020.063
    as

    Download full text from publisher

    File URL: https://www.federalreserve.gov/econres/feds/files/2020063pap.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.17016/FEDS.2020.063?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Daron Acemoglu & Amy Finkelstein & Matthew J. Notowidigdo, 2013. "Income and Health Spending: Evidence from Oil Price Shocks," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1079-1095, October.
    2. Melichar, Lori, 2009. "The effect of reimbursement on medical decision making: Do physicians alter treatment in response to a managed care incentive?," Journal of Health Economics, Elsevier, vol. 28(4), pages 902-907, July.
    3. Grant, Darren, 2009. "Physician financial incentives and cesarean delivery: New conclusions from the healthcare cost and utilization project," Journal of Health Economics, Elsevier, vol. 28(1), pages 244-250, January.
    4. Ake Blomqvist & Colin Busby, 2012. "How to Pay Family Doctors: Why "Pay per Patient" is Better Than Fee for Service," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 365, October.
    5. Amy Finkelstein, 2007. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 1-37.
    6. Croxson, B. & Propper, C. & Perkins, A., 2001. "Do doctors respond to financial incentives? UK family doctors and the GP fundholder scheme," Journal of Public Economics, Elsevier, vol. 79(2), pages 375-398, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dolton, Peter & Pathania, Vikram, 2016. "Can increased primary care access reduce demand for emergency care? Evidence from England's 7-day GP opening," Journal of Health Economics, Elsevier, vol. 49(C), pages 193-208.
    2. Dunn, Abe, 2016. "Health insurance and the demand for medical care: Instrumental variable estimates using health insurer claims data," Journal of Health Economics, Elsevier, vol. 48(C), pages 74-88.
    3. Rodrigo R. Soares & Rudi Rocha & Michel Szklo, 2021. "American Delusion: Life Expectancy and Welfare in the US from an International Perspective," Working Papers 13, Instituto de Estudos para Políticas de Saúde.
    4. Tor Iversen & Hilde Lurås, 2012. "Capitation and Incentives in Primary Care," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 26, Edward Elgar Publishing.
    5. Frankovic, Ivan & Kuhn, Michael, 2018. "Health insurance, endogenous medical progress, and health expenditure growth," ECON WPS - Working Papers in Economic Theory and Policy 01/2018, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    6. Cox, James C. & Sadiraj, Vjollca & Schnier, Kurt E. & Sweeney, John F., 2016. "Incentivizing cost-effective reductions in hospital readmission rates," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 24-35.
    7. Bhatia, M. & Dwivedi, L.K. & Banerjee, K. & Dixit, P., 2020. "An epidemic of avoidable caesarean deliveries in the private sector in India: Is physician-induced demand at play?," Social Science & Medicine, Elsevier, vol. 265(C).
    8. Mosquera, Roberto, 2022. "The long-term effect of resource booms on human capital," Labour Economics, Elsevier, vol. 74(C).
    9. Dominic Coey, 2013. "Physician Incentives and Treatment Choices in Heart Attack Management," Discussion Papers 12-027, Stanford Institute for Economic Policy Research.
    10. Frankovic, Ivan & Kuhn, Michael, 2023. "Health insurance, endogenous medical progress, health expenditure growth, and welfare," Journal of Health Economics, Elsevier, vol. 87(C).
    11. Yonghong An & Kai Zhao & Rong Zhou, 2016. "Health spending and public pension: evidence from panel data," Applied Economics, Taylor & Francis Journals, vol. 48(11), pages 987-1004, March.
    12. Volker Grossmann, 2021. "Medical Innovations and Ageing: A Health Economics Perspective," CESifo Working Paper Series 9387, CESifo.
    13. Somi Shin, 2021. "Healthcare provider response to payment system reform: evidence from New Zealand," SN Business & Economics, Springer, vol. 1(11), pages 1-29, November.
    14. Stefan Schiman-Vukan, 2013. "Langfristige Perspektiven der öffentlichen Finanzen in Österreich. Projektionen des Staatshaushalts bis 2050," WIFO Studies, WIFO, number 46670.
    15. Charles Courtemanche & James Marton & Benjamin Ukert & Aaron Yelowitz & Daniela Zapata, 2018. "Early Effects of the Affordable Care Act on Health Care Access, Risky Health Behaviors, and Self‐Assessed Health," Southern Economic Journal, John Wiley & Sons, vol. 84(3), pages 660-691, January.
    16. Anup Malani & Cynthia Kinnan & Gabriella Conti & Kosuke Imai & Morgen Miller & Shailender Swaminathan & Alessandra Voena & Bartosz Woda, 2024. "Evaluating pricing health insurance in lower-income countries: A field experiment in India," IFS Working Papers W24/33, Institute for Fiscal Studies.
    17. Christopher J. Ruhm, 2019. "Shackling the Identification Police?," Southern Economic Journal, John Wiley & Sons, vol. 85(4), pages 1016-1026, April.
    18. Katherine Baicker & Dana Goldman, 2011. "Patient Cost-Sharing and Healthcare Spending Growth," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 47-68, Spring.
    19. Alex R. Horenstein & Manuel S. Santos, 2012. "A Cross-Country Analysis of Health Care Expenditures," Working Papers 2013-05, University of Miami, Department of Economics.
    20. Alex Nikolsko‐Rzhevskyy & Oleksandr Talavera & Nam Vu, 2023. "The flood that caused a drought," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 965-981, October.

    More about this item

    Keywords

    Primary care physicians; Specialists; Specialty procedures; Rural; Reallocation; Medicare; Fee-for-service;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2020-63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.