IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/29564.html
   My bibliography  Save this paper

When (and Why) Providers Do Not Respond to Changes in Reimbursement Rates

Author

Listed:
  • Marcus Dillender
  • Lu G. Jinks
  • Anthony T. Lo Sasso

Abstract

Policies to reduce health care payments can lead to health care access issues if providers reduce their supply in response to reimbursement rate reductions. We examine the impact of a policy that reduced reimbursement rates by 30% in a workers’ compensation insurance system that provided generous reimbursement rates relative to other payers even after the rate reduction. The results suggest that providers’ supply is inelastic at the part of the reimbursement distribution that we study. Our estimates indicate that the policy reduced annual workers’ compensation medical costs by over $400 million without affecting injured workers’ health care utilization or health.

Suggested Citation

  • Marcus Dillender & Lu G. Jinks & Anthony T. Lo Sasso, 2021. "When (and Why) Providers Do Not Respond to Changes in Reimbursement Rates," NBER Working Papers 29564, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29564
    Note: EH PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w29564.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Martin Benjamin Hackmann & R. Vincent Pohl, 2018. "Patient vs. Provider Incentives in Long-Term Care," CESifo Working Paper Series 7373, CESifo.
    2. Alice J. Chen & Elizabeth L. Munnich & Stephen T. Parente & Michael R. Richards, 2022. "Do Physicians Warm Up to Higher Medicare Prices? Evidence from Alaska," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(2), pages 394-425, March.
    3. Chandra, Amitabh & Cutler, David & Song, Zirui, 2011. "Who Ordered That? The Economics of Treatment Choices in Medical Care," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 397-432, Elsevier.
    4. Diane Alexander, 2020. "How Do Doctors Respond to Incentives? Unintended Consequences of Paying Doctors to Reduce Costs," Journal of Political Economy, University of Chicago Press, vol. 128(11), pages 4046-4096.
    5. Colleen M. Carey & Sarah Miller & Laura R. Wherry, 2020. "The Impact of Insurance Expansions on the Already Insured: The Affordable Care Act and Medicare," American Economic Journal: Applied Economics, American Economic Association, vol. 12(4), pages 288-318, October.
    6. Diane Alexander & Molly Schnell, 2024. "The Impacts of Physician Payments on Patient Access, Use, and Health," American Economic Journal: Applied Economics, American Economic Association, vol. 16(3), pages 142-177, July.
    7. Jeffrey Clemens & Joshua D. Gottlieb, 2017. "In the Shadow of a Giant: Medicare’s Influence on Private Physician Payments," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 1-39.
    8. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-1349, April.
    9. Papanicolas, Irene & Woskie, Liana R. & Jha, Ashish K., 2018. "Health care spending in the United States and other high-income countries," LSE Research Online Documents on Economics 87362, London School of Economics and Political Science, LSE Library.
    10. Michael Batty & Benedic Ippolito, 2017. "Financial Incentives, Hospital Care, and Health Outcomes: Evidence from Fair Pricing Laws," American Economic Journal: Economic Policy, American Economic Association, vol. 9(2), pages 28-56, May.
    11. Atul Gupta, 2021. "Impacts of Performance Pay for Hospitals: The Readmissions Reduction Program," American Economic Review, American Economic Association, vol. 111(4), pages 1241-1283, April.
    12. Melissa McInerney & Jennifer M. Mellor & Lindsay M. Sabik, 2017. "The Effects of State Medicaid Expansions for Working-Age Adults on Senior Medicare Beneficiaries," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 408-438, August.
    13. Tal Gross & Adam Sacarny & Maggie Shi & David Silver, 2021. "Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul," NBER Working Papers 29023, National Bureau of Economic Research, Inc.
    14. Alice J. Chen & Amy J. Graves & Matthew J. Resnick & Michael R. Richards, 2018. "Does Spending More Get More? Health Care Delivery and Fiscal Implications From a Medicare Fee Bump," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 37(4), pages 706-731, September.
    15. Martin B. Hackmann & R. Vincent Pohl & Nicolas R. Ziebarth, 2024. "Patient versus Provider Incentives in Long-Term Care," American Economic Journal: Applied Economics, American Economic Association, vol. 16(3), pages 178-218, July.
    16. Timothy G. Conley & Christopher R. Taber, 2011. "Inference with "Difference in Differences" with a Small Number of Policy Changes," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 113-125, February.
    17. David Powell & Seth Seabury, 2018. "Medical Care Spending and Labor Market Outcomes: Evidence from Workers' Compensation Reforms," American Economic Review, American Economic Association, vol. 108(10), pages 2995-3027, October.
    18. Frank Sloan & Janet Mitchell & Jerry Cromwell, 1978. "Physician Participation in State Medicaid Programs," NBER Chapters, in: The Economics of Physician and Patient Behavior, pages 211-245, National Bureau of Economic Research, Inc.
    19. Craig L. Garthwaite, 2012. "The Doctor Might See You Now: The Supply Side Effects of Public Health Insurance Expansions," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 190-215, August.
    20. Marika Cabral & Colleen Carey & Sarah Miller, 2021. "The Impact of Provider Payments on Health Care Utilization of Low-Income Individuals: Evidence from Medicare and Medicaid," NBER Working Papers 29471, National Bureau of Economic Research, Inc.
    21. Paul J. Eliason & Paul L. E. Grieco & Ryan C. McDevitt & James W. Roberts, 2018. "Strategic Patient Discharge: The Case of Long-Term Care Hospitals," American Economic Review, American Economic Association, vol. 108(11), pages 3232-3265, November.
    22. Liran Einav & Amy Finkelstein & Neale Mahoney, 2018. "Provider Incentives and Healthcare Costs: Evidence From Long‐Term Care Hospitals," Econometrica, Econometric Society, vol. 86(6), pages 2161-2219, November.
    23. Thomas Buchmueller & Sarah Miller & Marko Vujicic, 2016. "How Do Providers Respond to Changes in Public Health Insurance Coverage? Evidence from Adult Medicaid Dental Benefits," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 70-102, November.
    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


    Cited by:

    1. Nicholas Benson & Jose Joaquin Lopez, 2024. "Surgeons' response to reimbursement changes for alternative procedures: Evidence from spine fusion in the U.S," Contemporary Economic Policy, Western Economic Association International, vol. 42(1), pages 41-55, January.
    2. Cooper, Zack & Kowalski, Amanda & Powell, Eleanor Neff & Wu, Jennifer D., 2024. "Politics and health care spending in the United States: A case study from the passage of the 2003 Medicare Modernization Act," Journal of Health Economics, Elsevier, vol. 95(C).

    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. Geruso, Michael & Richards, Michael R., 2022. "Trading spaces: Medicare's regulatory spillovers on treatment setting for non-Medicare patients," Journal of Health Economics, Elsevier, vol. 84(C).
    2. Neprash, Hannah T. & Zink, Anna & Sheridan, Bethany & Hempstead, Katherine, 2021. "The effect of Medicaid expansion on Medicaid participation, payer mix, and labor supply in primary care," Journal of Health Economics, Elsevier, vol. 80(C).
    3. Huh, Jason, 2021. "Medicaid and provider supply," Journal of Public Economics, Elsevier, vol. 200(C).
    4. Jeffrey Clemens & Joshua D. Gottlieb & Jeffrey Hicks, 2021. "How Would Medicare for All Affect Health System Capacity? Evidence from Medicare for Some," Tax Policy and the Economy, University of Chicago Press, vol. 35(1), pages 225-262.
    5. Cadena, Brian C. & Smith, Austin C., 2022. "Performance pay, productivity, and strategic opt-out: Evidence from a community health center," Journal of Public Economics, Elsevier, vol. 206(C).
    6. Attema, Arthur E. & Galizzi, Matteo M. & Groß, Mona & Hennig-Schmidt, Heike & Karay, Yassin & L’Haridon, Olivier & Wiesen, Daniel, 2023. "The formation of physician altruism," Journal of Health Economics, Elsevier, vol. 87(C).
    7. Abe Dunn & Joshua D Gottlieb & Adam Hale Shapiro & Daniel J Sonnenstuhl & Pietro Tebaldi, 2024. "A Denial a Day Keeps the Doctor Away," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(1), pages 187-233.
    8. Jeffrey P. Clemens & Jonathan M. Leganza & Alex Masucci, 2021. "Plugging Gaps in Payment Systems: Evidence from the Take-Up of New Medicare Billing Codes," CESifo Working Paper Series 9209, CESifo.
    9. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    10. Devlin, Aileen M. & McCormack, Grace, 2023. "Physician responses to Medicare reimbursement rates," Journal of Health Economics, Elsevier, vol. 92(C).
    11. Denis Agniel & Jonathan H. Cantor & Johanna Catherine Maclean & Kosali I. Simon & Erin Taylor, 2023. "Insurance Coverage and Provision of Opioid Treatment: Evidence from Medicare," NBER Working Papers 31884, National Bureau of Economic Research, Inc.
    12. Yang, Ou & Chan, Marc K. & Cheng, Terence C. & Yong, Jongsay, 2020. "Cream skimming: Theory and evidence from hospital transfers and capacity utilization," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 68-87.
    13. Liran Einav & Amy Finkelstein & Yunan Ji & Neale Mahoney, 2020. "Randomized trial shows healthcare payment reform has equal-sized spillover effects on patients not targeted by reform," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 117(32), pages 18939-18947, August.
    14. Kole Reddig, 2024. "Spillover between Medicare and Medicaid: Evidence from decreasing physician reimbursements," Contemporary Economic Policy, Western Economic Association International, vol. 42(2), pages 223-236, April.
    15. Colleen M. Carey & Sarah Miller & Laura R. Wherry, 2020. "The Impact of Insurance Expansions on the Already Insured: The Affordable Care Act and Medicare," American Economic Journal: Applied Economics, American Economic Association, vol. 12(4), pages 288-318, October.
    16. Alice J. Chen & Elizabeth L. Munnich & Stephen T. Parente & Michael R. Richards, 2022. "Do Physicians Warm Up to Higher Medicare Prices? Evidence from Alaska," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 41(2), pages 394-425, March.
    17. Cooper, Zack & Kowalski, Amanda & Powell, Eleanor Neff & Wu, Jennifer D., 2024. "Politics and health care spending in the United States: A case study from the passage of the 2003 Medicare Modernization Act," Journal of Health Economics, Elsevier, vol. 95(C).
    18. Hamersma, Sarah & Maclean, Johanna Catherine, 2021. "Do expansions in adolescent access to public insurance affect the decisions of substance use disorder treatment providers?," Journal of Health Economics, Elsevier, vol. 76(C).
    19. Nicholas Benson & Jose Joaquin Lopez, 2024. "Surgeons' response to reimbursement changes for alternative procedures: Evidence from spine fusion in the U.S," Contemporary Economic Policy, Western Economic Association International, vol. 42(1), pages 41-55, January.
    20. Lai, Yi & Fu, Hongqiao & Li, Ling & Yip, Winnie, 2022. "Hospital response to a case-based payment scheme under regional global budget: The case of Guangzhou in China," Social Science & Medicine, Elsevier, vol. 292(C).

    More about this item

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    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:nbr:nberwo:29564. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.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.