Do Physicians Engage in Offsetting Behavior? Empirical Evidence from Medicare Part B
40 Pages Posted: 1 Dec 2016 Last revised: 8 Aug 2018
Date Written: August 3, 2018
Historically, Medicare has operated under the assumption that health care providers respond to reductions in reimbursement through increased provision of services in an effort to offset declining practice revenue; however, recent empirical work examining fee reductions has found either small offsetting effects or evidence of reductions in the quantity supplied. Using a distance matching approach, that matches practices to nearby practices that are subject to different reimbursement rates, we find overall evidence in support of Medicare’s offsetting assumption collectively for all services and for evaluation and management services. We also find evidence of a traditional volume response for imaging and testing services.
Keywords: Medicare Part B, Fee-For-Service, Offsetting, Supplier Induced Demand
JEL Classification: I11, I18
Suggested Citation: Suggested Citation