Working Paper

The Consequences of Medicare Pricing: An Explanation of Treatment Choice

Abstract: Primary care physicians (PCPs) provide more specialty procedures in less-urban areas, where specialists are fewer. Using a structural random-coefficient model and the demographic and time variation in the data, this paper shows that changes in policy-set reimbursements lead to a reallocation of the suddenly-more-remunerative procedures away from specialists and toward PCPs, and this effect is stronger, the more rural an area is. A reimbursement-unit increase for a given procedure leads to outside-metro PCPs gaining 7-15% market share more than metro PCPs in that procedure, at the expense of specialists. Small metropolitan areas and very rural areas are the most affected.

Keywords: Primary care physicians; Specialists; Specialty procedures; Rural; Reallocation; Medicare; Fee-for-service;

JEL Classification: I18; I13; J20; R12;

https://doi.org/10.17016/FEDS.2020.063

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2020-08-21

Number: 2020-063