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 2012-2017. 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