NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Physician Fee Policy and Medicaid Program Costs

Jonathan Gruber, Kathleen Adams, Joseph P. Newhouse

NBER Working Paper No. 6087
Issued in July 1997
NBER Program(s):   HC   PE

We investigate the hypothesis that increasing access for the indigent to physician offices shifts care from hospital outpatient settings and lowers Medicaid costs (the so-called offset effect'). To evaluate this hypothesis we exploit a large increase in physician fees in the Tennessee Medicaid program, using Georgia as a control. We find that beneficiaries shifted care from clinics to offices, but that there was little or no shifting from hospital outpatient departments or emergency rooms. Thus, we find no offset effect in outpatient expenditures. Inpatient admissions and expenditures fell, reducing overall program spending eight percent. Because the inpatient reduction did not occur in ambulatory-care-sensitive diagnoses, however, we cannot demonstrate a causal relationship with the fee change.

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Document Object Identifier (DOI): 10.3386/w6087

Published: Journal of Human Resources, Vol. 32, no. 4 (Fall 1997): 611-634. citation courtesy of

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