NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Industry Input in Policymaking: Evidence from Medicare

David C. Chan, Jr, Michael J. Dickstein

NBER Working Paper No. 24354
Issued in February 2018
NBER Program(s):Health Care, Industrial Organization, Law and Economics, Public Economics, Political Economy

In setting prices for physician services, Medicare solicits input from a committee that evaluates proposals from industry. We investigate whether this arrangement leads to prices biased toward the interests of committee members. We find that increasing a measure of affiliation between the committee and proposers by one standard deviation increases prices by 10%, demonstrating a pathway for regulatory capture. We then evaluate the effect of affiliation on the quality of information used in price-setting. More affiliated proposals produce less hard information, measured as lower quality survey data. However, affiliation results in prices that are more closely followed by private insurers, suggesting that affiliation may increase the total information used in price-setting.

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Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24354

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