Journal of Political Economy Vol. 125 No. 1 2017
In the Shadow of a Giant: Medicare’s Influence on Private Physician Payments
Abstract
We analyze Medicare's influence on private insurers' payments for physicians' services. Using a large administrative change in reimbursements for surgical versus medical care, we find that private prices follow Medicare's lead. A $1.00 increase in Medicare's fees increases corresponding private prices by $1.16. A second set of Medicare fee changes, which generates area-specific payment shocks, has a similar effect on private reimbursements. Medicare's influence is strongest in areas with concentrated insurers and competitive physician markets, consistent with insurer-doctor bargaining. By echoing Medicare's pricing changes, these payment spillovers amplify Medicare's impact on specialty choice and other welfare-relevant aspects of physician practices.
- DOI
- 10.1086/689772
- Volume
- 125
- Issue
- 1
- Pages
- 1-39
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref