*The author gratefully acknowledges comments of Michael Grossman, Val Lambson, Tom McGuire, and an anonymous referee and the financial support of a Brigham Young University research grant.
PHYSICIANS' COST SHIFTING BEHAVIOR: MEDICAID VERSUS OTHER PATIENTS
Version of Record online: 29 JUN 2007
Contemporary Economic Policy
Volume 15, Issue 2, pages 74–84, April 1997
How to Cite
SHOWALTER, M. H. (1997), PHYSICIANS' COST SHIFTING BEHAVIOR: MEDICAID VERSUS OTHER PATIENTS. Contemporary Economic Policy, 15: 74–84. doi: 10.1111/j.1465-7287.1997.tb00467.x
- Issue online: 29 JUN 2007
- Version of Record online: 29 JUN 2007
Much of the debate about rising health care costs in the United States centers on the notion of “cost shifting.” Cost shifting is loosely defined as charging one set of patients a higher price to offset losses on another set of patients. One aspect of the cost shifting debate that the empirical work has ignored is whether or not doctors—as opposed to hospitals—practice cost shifting. The analysis here investigates this question using the Physicians' Practice Costs and Income Survey, 1983–1985 (PPCIS, expanded version)
Using variation across states in Medicaid reimbursements, the analysis finds that lower Medicaid reimbursements tend to lower the fees physicians charge, contradicting the standard cost shifting story. Evidence also suggests that lower Medicaid reimbursements tend to cause physicians to treat fewer Medicaid patients. These results are consistent with profit maximizing behavior for physicians and also with the hypothesis that physicians exert some monopoly power.