In the Shadow of a Giant: Medicare's Influence on Private Payment SystemsNBER Working Paper (2015)
We demonstrate Medicare's influence on private insurers' payments for physicians' services. Using a large administrative change in payments for surgical versus medical care, we find that private prices follow Medicare's lead. A $1 change in Medicare's fees moved private prices by $1.16. A second set of Medicare payment changes, which generated area-specific reimbursement shocks, had a similar effect on private sector prices. Medicare's influence is strongest in areas with concentrated insurers, small physician groups, and competitive physician markets. The public sector's influences on system-wide resource allocation and costs extend well beyond the share of health expenditures it finances directly.
- health insurance,
Citation InformationJeffrey Clemens and Joshua D. Gottlieb. 2013. "In the Shadow of a Giant: Medicare's Influence on Private Payment Systems" NBER Working Paper No. 19503, October