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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
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    2. 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.
    3. 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).

    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

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