The Impact of Provider Payments on Health Care Utilization of Low-Income Individuals: Evidence from Medicare and Medicaid
Provider payments are the key determinant of insurance generosity within many health insurance programs covering low-income populations. This paper analyzes the effects of a large, federally-mandated provider payment increase for primary care services provided to low-income elderly and disabled individuals. Drawing upon comprehensive administrative payment and utilization data, we leverage variation across beneficiaries and across providers in the policy-induced payment increase in difference-in-differences and triple differences research designs. The estimates indicate that the provider payment reform led to a 6.3% increase in the targeted services provided to eligible beneficiaries, indicating an implied payment elasticity of 1.2. Further, the provider payment reform decreased the fraction of low-income beneficiaries with no primary care visit in a year by 9%, completely closing the gap relative to higher-income beneficiaries with the same observable characteristics. Heterogeneity analysis indicates that the payment increase led to an expansion of utilization for many subgroups, with somewhat larger effects among beneficiaries who are younger, are white, and live in areas with many primary care providers per capita.
For providing helpful comments, we thank Sandra Black, Jeffrey Clemens, Kate Ho, Amanda Kowalski, Timothy Layton, Julian Reif, and Molly Schnell, and seminar participants at Monash University, the University of Chicago Harris School, the University of Michigan, Stanford University, the American Society of Health Economists annual meetings, and the ASSA annual meetings. Additionally, we thank Megan Hyland, Seth Neller, and Jinyeong Son for providing excellent research assistance. Cabral gratefully acknowledges financial support from the National Science Foundation CAREER Award (1845190). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- An Affordable Care Act related increase in reimbursements for providers serving low-income Medicare beneficiaries increased this...