An empirical evaluation of the physician offsetting response

ABSTRACT

Using data on office visits for Medicare-treating physicians, this study examines the effects of several policy changes that reduced real reimbursement for some, but not all physicians, from 2012 to 2017. Using genetic propensity score weighted Difference-in-Differences (DID) models that include individual physician and county fixed-effects, this study finds strong evidence that those who experienced a reimbursement reduction increased their service provision, indicative of a supplier-induced demand response. Our estimates imply that 27–33% of a reimbursement reduction will be offset through changes in provider behavior.

KEYWORDS:

• Medicare Part B
• fee-for-service
• offsetting
• supplier-induced demand

JEL CLASSIFICATION:

• I11
• I18

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ See Appendix Table A1 for RR summary statistics

² See Appendix Table A2.

³ Among the group of eliminated observations, 2,396 were treated observations without reasonable matches and 13,317 were control units with no reasonable resemblance to treatment units.

⁴ The results are also robust to alternative PTA sampling criteria (See Appendix Table (A3) and eliminating high-volume providers.