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Bargaining in the Shadow of a Giant: Medicare's Influence on Private Payment Systems

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  • Jeffrey Clemens
  • Joshua D. Gottlieb

Abstract

We analyze Medicare's influence on private payments for physicians' services. Using a large administrative change in surgical relative to medical reimbursements, we find that private prices follow Medicare's lead. A $1 change in Medicare's relative payments moves private payments by $1.20. Results are similar when Medicare alters overall reimbursement levels. Medicare thus strongly influences both relative valuations and aggregate expenditures. Medicare's price transmission is strongest when physician groups are numerous and competitive. Transaction and bargaining costs may lead the development of payment systems to suffer from a classic coordination problem. Improvements in Medicare's payment models may therefore be public goods.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19503.

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Date of creation: Oct 2013
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Handle: RePEc:nbr:nberwo:19503

Note: AG HE PE HC
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  1. Jeffrey Clemens, 2012. "The Effect of U.S. Health Insurance Expansions on Medical Innovation," Discussion Papers 11-016, Stanford Institute for Economic Policy Research.
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  18. Dranove, David, 1988. "Pricing by non-profit institutions : The case of hospital cost-shifting," Journal of Health Economics, Elsevier, vol. 7(1), pages 47-57, March.
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Cited by:
  1. Jeffrey Clemens, 2013. "The Effect of U.S. Health Insurance Expansions on Medical Innovation," NBER Working Papers 19761, National Bureau of Economic Research, Inc.
  2. Jeffrey Clemens, 2014. "Regulatory Redistribution in the Market for Health Insurance," NBER Working Papers 19904, National Bureau of Economic Research, Inc.
  3. Mark Duggan & Amanda Starc & Boris Vabson, 2014. "Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage Program," NBER Working Papers 19989, National Bureau of Economic Research, Inc.
  4. Abe Dunn & Adam Hale Shapiro, 2013. "The impact of health care reform on physician payments: evidence from Massachusetts," Working Paper Series 2013-36, Federal Reserve Bank of San Francisco.

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