The Consequences of Medicare Pricing: An Explanation of Treatment Choice

28 Pages Posted: 12 Dec 2019

See all articles by Elena Falcettoni

Elena Falcettoni

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2019

Abstract

This paper analyzes primary care physicians’ (PCP) response to fee-for-service pricing as the degree of urbanity varies. Data analysis of Medicare microdata documents that PCP provide more (remunerative) specialty procedures in less urban areas, where specialists are fewer. Using a structural random coefficients model, the demographic and time variation present in the data, and the policy-set reimbursement fees, this paper finds that a one-unit (~$36) increase in reimbursement for a specialty procedure leads to PCP increasing their market share by 7-15% more than their urban counterparts, at the expense of specialists. Small metropolitan areas and very rural areas are the most affected.

Keywords: fee-for-service, overutilization, primary care, specialist, rural, healthcare

JEL Classification: R12, R23, I13, I18, I11

Suggested Citation

Falcettoni, Elena, The Consequences of Medicare Pricing: An Explanation of Treatment Choice (September 1, 2019). Available at SSRN: https://ssrn.com/abstract=3493187 or http://dx.doi.org/10.2139/ssrn.3493187

Elena Falcettoni (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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United States

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