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

We analyze Medicare’s influence on private insurers’ payments for physicians’ services. Using a large administrative change in reimbursements for surgical versus medical care, we find that private prices follow Medicare’s lead. A $1.00 increase in Medicare’s fees increases corresponding private pric...

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Bibliographic Details
Published inThe Journal of political economy Vol. 125; no. 1; pp. 1 - 39
Main Authors Clemens, Jeffrey, Gottlieb, Joshua D.
Format Journal Article
LanguageEnglish
Published United States University of Chicago Press 01.02.2017
University of Chicago, acting through its Press
Subjects
Doctors
Economic theory
Fees & charges
Health insurance
Insurance rates
Medicare
Physicians
Political economy
Reimbursement
Studies
United States
United States > US
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Summary:We analyze Medicare’s influence on private insurers’ payments for physicians’ services. Using a large administrative change in reimbursements for surgical versus medical care, we find that private prices follow Medicare’s lead. A $1.00 increase in Medicare’s fees increases corresponding private prices by $1.16. A second set of Medicare fee changes, which generates area-specific payment shocks, has a similar effect on private reimbursements. Medicare’s influence is strongest in areas with concentrated insurers and competitive physician markets, consistent with insurer-doctor bargaining. By echoing Medicare’s pricing changes, these payment spillovers amplify Medicare’s impact on specialty choice and other welfare-relevant aspects of physician practices.
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ISSN:0022-3808
1537-534X
DOI:10.1086/689772