Advanced Search
MyIDEAS: Login

Regulated Price Discrimination and Quality: The Implications of Medicaid Reimbursement Policy for the Nursing Home Industry

Contents:

Author Info

  • Paul J. Gertler

Abstract

Nursing homes participate simultaneously in a regulated and an unregulated market, and are required to supply the same quality of service to both markets. Specifically, nursing homes compete for patients who finance their care privately, and patients whose care is financed by the government's Medicaid program. The government reimburses nursing homes a set fee for the care of Medicaid patients, whereas nursing homes charge "private pay" patients what the market will bear. Quality is determined by competition in the"private pay" patient market. The greater the size of the "private pay" market relative to the Medicaid market, the higher is quality. We find that Medicaid policy makers face a trade-off between the access of Medicaid patients to care and quality. Specifically, an increase in the Medicaid reimbursement rate causes nursing homes to reduce quality, increase"private pay" price, and to admit more Medicaid patients and fewer "private pay" patients. Hence, in the nursing home industry, higher prices are associated with lower levels of quality. In addition, nursing homes set quality higher if the remibursement rate is set via "cost plus" pricing than if it is set via "flat rate" pricing. Moreover, consumers in both markets are better off under "cost plus" pricing, nursing homes earn higher profits under "flat rate" pricing, and total governmental Medicaid expenditures are the same under both reimbursement methods.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w1667.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1667.

as in new window
Length:
Date of creation: Jul 1985
Date of revision:
Handle: RePEc:nbr:nberwo:1667

Note: HE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Leffler, Keith B, 1982. "Ambiguous Changes in Product Quality," American Economic Review, American Economic Association, vol. 72(5), pages 956-67, December.
  2. Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, vol. 43(17), pages 127-37, May.
  3. Meiners, Mark R., 1982. "An econometric analysis of the major determinants of nursing home costs in the United States," Social Science & Medicine, Elsevier, vol. 16(8), pages 887-898, January.
  4. Paul J. Gertler, 1985. "Subsidies, Quality, and Regulation in the Nursing Home Industry," NBER Working Papers 1691, National Bureau of Economic Research, Inc.
  5. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Paul J. Gertler, 1985. "A Decomposition of the Elasticity of Medicaid Nursing Home Expenditures Into Price, Quality, and Quantity Effects," NBER Working Papers 1751, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1667. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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