Medicare Reimbursement and Quality of Care

I thought that I would highlight some recent research done by a former fellow Ph.D student at WSU, Chris Brunt, and a current WSU faculty member, Gail Jensen, on the effect of price restrictions enacted by states for Medicare Part B reimbursement. Here is a link (gated) and the abstract:

The maximum amount physicians can charge Medicare patients for Part B services depends on Medicare reimbursement rates and on federal and state restrictions regarding balance billing. This study evaluates whether Part B payment rates, state restrictions on balance billing beyond the federal limit, and physician balance billing influence how beneficiaries rate the quality of their doctor’s care. Using nationally representative data from the 2001 to 2003 Medicare Current Beneficiary Survey, this paper finds strong evidence that Medicare reimbursement rates, and state balance billing restrictions influence a wide range of perceived care quality measures. Lower Medicare reimbursement and restrictions on physicians’ ability to balance bill significantly reduce the perceived quality of care under Part B.

Economic theory clearly predicts that a mandated reduction in price will result in non-price rationing. However, prior to this paper there was a lack of empirical evidence with regards to the reductions in quality predicted by economic theory.

5 responses to “Medicare Reimbursement and Quality of Care

  1. I watched Chris present this paper and found it very interesting. A phrase that he used really stuck with me: “markets find ways to clear”. If not by price, then by quantity and/ or quality. Also, if I remember correctly he mentioned that the government asked a Harvard (or some other ivy league school) department to determine the Medicare prices to set, but they in turn outsourced it to the AMA. How absurd.

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