Finance and Economics Discussion Series (FEDS)
The Consequences of Medicare Pricing: An Explanation of Treatment Choice
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.
Accessible materials (.zip)
Keywords: Primary care physicians; Specialists; Specialty procedures; Rural; Reallocation; Medicare; Fee-for-service.
PDF: Full Paper