Do the Medicaid and Medicare programs compete for access to health care services? A longitudinal analysis of physician f
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Do the Medicaid and Medicare programs compete for access to health care services? A longitudinal analysis of physician fees, 1998–2004 Larry L. Howard
Received: 17 June 2013 / Accepted: 11 March 2014 © Springer Science+Business Media New York 2014
Abstract As the demand for publicly funded health care continues to rise in the U.S., there is increasing pressure on state governments to ensure patient access through adjustments in provider compensation policies. This paper longitudinally examines the fees that states paid physicians for services covered by the Medicaid program over the period 1998–2004. Controlling for an extensive set of economic and health care industry characteristics, the elasticity of states’ Medicaid fees, with respect to Medicare fees, is estimated to be in the range of 0.2–0.7 depending on the type of physician service examined. The findings indicate a significant degree of price competition between the Medicaid and Medicare programs for physician services that is more pronounced for cardiology and critical care, but not hospital care. The results also suggest several policy levers that work to either increase patient access or reduce total program costs through changes in fees. Keywords
Physician fees · Health care · Medicaid · Medicare · Federal state
JEL Classification
H51 · H77 · I18 · I38
1 Introduction The Medicaid and Medicare programs are the largest publicly funded health care programs in the U.S. Although each serves a distinctly different demographic population, they both utilize the same health care providers for many services provided to eligible individuals. A central question we ask in this paper is whether Medicaid competes with Medicare for access to health care services by adjusting fee levels in markets for physician services. While alternative outcomes in other markets are also of interest, a better understanding of the determinants of physician fees is important because they underlie the total cost of the programs to taxpayers,
L. L. Howard (B) Department of Economics, California State University, Fullerton, 800 N. State College Blvd., Fullerton, CA 92834-6848, USA e-mail: [email protected]
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as well as the effectiveness of the public spending on patient outcomes. In fact, the prevailing positive relationships between physician service compensation and patient access (Staiger et al. 2010; Decker 2009; Turcotte et al. 2005; Zuckerman et al. 2004; Baker and Royalty 2000; Cohen and Cunningham 1995) and between physician service compensation and service quality (Garthwaite 2011; Decker 2007; Gruber et al. 1999; McGuire and Pauly 1991) suggest payment levels have important consequences for the health outcomes of low-income families. For instance, higher Medicaid physician fees are associated with a lower prevalence of infant mortality (Currie et al. 1995) and low birth weight (Gray 2001). In this research we help shed light on the extent to which Medicare physician fees determine Medicaid physician fees. Since the 1980s, Medicare has generally
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