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Physician Fees and Procedure Intensity: The Case of Cesarean Delivery

  • Jon Gruber
  • John Kim
  • Dina Mayzlin

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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File URL: http://www.nber.org/papers/w6744.pdf
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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
Date of revision:
Publication status: published as Journal of Health Economics, Vol. 18, no. 4 (1999): 473-490.
Handle: RePEc:nbr:nberwo:6744
Note: HC
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Web page: http://www.nber.org
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  1. Jonathan Gruber & Maria Owings, 1994. "Physician Financial Incentives and Cesarean Section Delivery," NBER Working Papers 4933, National Bureau of Economic Research, Inc.
  2. 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.
  3. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers 0015, Boston University - Industry Studies Programme.
  4. 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.
  5. Cromwell, Jerry & Mitchell, Janet B., 1986. "Physician-induced demand for surgery," Journal of Health Economics, Elsevier, vol. 5(4), pages 293-313, December.
  6. Phelps, Charles E., 1986. "Induced demand -- can we ever know its extent?," Journal of Health Economics, Elsevier, vol. 5(4), pages 355-365, December.
  7. 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.
  8. Victor R. Fuchs, 1978. "The Supply of Surgeons and the Demand for Operations," NBER Working Papers 0236, National Bureau of Economic Research, Inc.
  9. 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.
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