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In the Shadow of a Giant: Medicare's Influence on Private Physician Payments

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  • Jeffrey Clemens
  • Joshua D. Gottlieb

Abstract

We demonstrate Medicare's influence on private insurers' payments for physicians' services. Using a large administrative change in payments for surgical versus medical care, we find that private prices follow Medicare's lead. A $1 change in Medicare's fees moved private prices by $1.16. A second set of Medicare payment changes, which generated area-specific reimbursement shocks, had a similar effect on private sector prices. Medicare's influence is strongest in areas with concentrated insurers, small physician groups, and competitive physician markets. The public sector's influences on system-wide resource allocation and costs extend well beyond the share of health expenditures it finances directly.

Suggested Citation

  • Jeffrey Clemens & Joshua D. Gottlieb, 2013. "In the Shadow of a Giant: Medicare's Influence on Private Physician Payments," NBER Working Papers 19503, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19503
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    References listed on IDEAS

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    Cited by:

    1. Joseph P. Newhouse & Mary Beth Landrum & Mary Price & J. Michael McWilliams & John Hsu & Thomas McGuire, 2018. "The Comparative Advantage of Medicare Advantage," NBER Working Papers 24289, National Bureau of Economic Research, Inc.
    2. repec:eee:jhecon:v:55:y:2017:i:c:p:153-167 is not listed on IDEAS
    3. Gravelle, Hugh S & Liu, Dan & Propper, Carol & Santos, Rita, 2018. "Spatial competition and quality: Evidence from the English family doctor market," CEPR Discussion Papers 12917, C.E.P.R. Discussion Papers.
    4. Laurence Baker & M. Kate Bundorf & Aileen Devlin & Daniel P. Kessler, 2016. "Why Don’t Commercial Health Plans Use Prospective Payment?," NBER Working Papers 22709, National Bureau of Economic Research, Inc.
    5. Marika Cabral & Michael Geruso & Neale Mahoney, 2014. "Do Larger Health Insurance Subsidies Benefit Patients or Producers? Evidence from Medicare Advantage," NBER Working Papers 20470, National Bureau of Economic Research, Inc.
    6. Laurence C. Baker & M. Kate Bundorf & Daniel P. Kessler, 2017. "Does Multispecialty Practice Enhance Physician Market Power?," NBER Working Papers 23871, National Bureau of Economic Research, Inc.
    7. Duggan, Mark & Starc, Amanda & Vabson, Boris, 2016. "Who benefits when the government pays more? Pass-through in the Medicare Advantage program," Journal of Public Economics, Elsevier, vol. 141(C), pages 50-67.
    8. Jeffrey Clemens & Stan Veuger, 2015. "Risks to the Returns to Medical Innovation: The Case of Myriad Genetics," NBER Working Papers 21469, National Bureau of Economic Research, Inc.
    9. Jeffrey Clemens, 2015. "Regulatory Redistribution in the Market for Health Insurance," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 109-134, April.
    10. Clemens, Jeffrey & Gottlieb, Joshua D. & Shapiro, Adam Hale, 2016. "Medicare payment cuts continue to restrain inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    11. Andrew Friedson & Jing Li, 2015. "The impact of agglomeration economies on hospital input prices," Health Economics Review, Springer, vol. 5(1), pages 1-15, December.
    12. Dunn, Abe & Shapiro, Adam Hale, 2015. "Physician payments under health care reform," Journal of Health Economics, Elsevier, vol. 39(C), pages 89-105.
    13. Jeffrey Clemens & Joshua D. Gottlieb & Tímea Laura Molnár, 2015. "The Anatomy of Physician Payments: Contracting Subject to Complexity," NBER Working Papers 21642, National Bureau of Economic Research, Inc.
    14. Olesya Fomenko & Jonathan Gruber, 2016. "Claims-Shifting: The Problem of Parallel Reimbursement Regimes," NBER Working Papers 22318, National Bureau of Economic Research, Inc.
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    17. Clemens, Jeffrey & Gottlieb, Joshua D. & Shapiro, Adam Hale, 2014. "How much do Medicare cuts reduce inflation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
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    20. David C. Chan, Jr & Michael J. Dickstein, 2018. "Industry Input in Policymaking: Evidence from Medicare," NBER Working Papers 24354, National Bureau of Economic Research, Inc.
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    More about this item

    JEL classification:

    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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