Do Physicians Engage in Offsetting Behavior? Empirical Evidence from Medicare Part B

40 Pages Posted: 1 Dec 2016 Last revised: 8 Aug 2018

Christopher Brunt

Georgia Southern University - Department of Finance and Economics

Joshua R. Hendrickson

University of Mississippi; American Institute for Economic Research

Date Written: August 3, 2018

Abstract

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

Brunt, Christopher and Hendrickson, Joshua R., Do Physicians Engage in Offsetting Behavior? Empirical Evidence from Medicare Part B (August 3, 2018). Available at SSRN: https://ssrn.com/abstract=2877310 or http://dx.doi.org/10.2139/ssrn.2877310

Christopher Brunt

Georgia Southern University - Department of Finance and Economics ( email )

P.O. Box 815s
Statesboro, GA 30460
United States

Joshua R. Hendrickson (Contact Author)

University of Mississippi ( email )

Oxford, MS 38677
United States

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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