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Physician Fees and Procedure Intensity: The Case of Cesarean Delivery

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  • Jon Gruber
  • John Kim
  • Dina Mayzlin

Abstract

While there is a large literature investigating the response of treatment intensity to Medicare reimbursement differentials, there is much less work on this question for the Medicaid program. The answers for Medicare may not apply in the Medicaid context, since a smaller share of physician's patients will be Medicaid insured, so that income effects from fee changes may be dominated by substitution effects. We investigate the effect of Medicaid fee differentials on the use of cesarean delivery over the 1988-1992 period. We find, in contrast to the backward-bending supply curve implied by the Medicare literature larger fee differentials between cesarean and normal childbirth for the Medicaid program leads to higher cesarean delivery rates. In particular, we find that the lower fee differentials between cesarean and normal childbirth under the Medicaid program than under private insurance can explain between one-half and three-quarters of the difference between Medicaid and private cesarean delivery rates. Our results suggest that Medicaid reimbursement reductions can cause real reductions in the intensity with which Medicaid patients are treated.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6744.

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Date of creation: Oct 1998
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Publication status: published as Journal of Health Economics, Vol. 18, no. 4 (1999): 473-490.
Handle: RePEc:nbr:nberwo:6744

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  1. T Rice & R Labelle, 1989. "Do Physicians Induce Demand for Medical Service?," Centre for Health Economics and Policy Analysis Working Paper Series 18, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
  2. J Hurley & R Labelle & T Rice, 1990. "The Relationship Between Physician Fees and the Utilization of Medical Services in Ontario," Centre for Health Economics and Policy Analysis Working Paper Series 1990-04, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
  3. Jonathan Gruber & Maria Owings, 1994. "Physician Financial Incentives and Cesarean Section Delivery," NBER Working Papers 4933, National Bureau of Economic Research, Inc.
  4. McGuire, Thomas G. & Pauly, Mark V., 1991. "Physician response to fee changes with multiple payers," Journal of Health Economics, Elsevier, vol. 10(4), pages 385-410.
  5. Richard D. Auster & Ronald L. Oaxaca, 1981. "Identification of Supplier Induced Demand in the Health Care Sector," Journal of Human Resources, University of Wisconsin Press, vol. 16(3), pages 327-342.
  6. Cromwell, Jerry & Mitchell, Janet B., 1986. "Physician-induced demand for surgery," Journal of Health Economics, Elsevier, vol. 5(4), pages 293-313, December.
  7. Victor R. Fuchs, 1978. "The Supply of Surgeons and the Demand for Operations," NBER Working Papers 0236, National Bureau of Economic Research, Inc.
  8. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers 0015, Boston University - Industry Studies Programme.
  9. Phelps, Charles E., 1986. "Induced demand -- can we ever know its extent?," Journal of Health Economics, Elsevier, vol. 5(4), pages 355-365, December.
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Cited by:
  1. Jonathan Gruber, 2000. "Medicaid," NBER Working Papers 7829, National Bureau of Economic Research, Inc.
    • Jonathan Gruber, 2003. "Medicaid," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 15-78 National Bureau of Economic Research, Inc.
  2. Janet Currie & W. Bentley MacLeod, 2006. "First Do No Harm?: Tort Reform and Birth Outcomes," NBER Working Papers 12478, National Bureau of Economic Research, Inc.
  3. David C. Grabowski & Jonathan Gruber & Joseph J. Angelelli, 2006. "Nursing Home Quality as a Public Good," NBER Working Papers 12361, National Bureau of Economic Research, Inc.
  4. Jostein Grytten & Fredrik Carlsen & Irene Skau, 2008. "Primary physicians’ response to changes in fees," The European Journal of Health Economics, Springer, vol. 9(2), pages 117-125, May.

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