On Friday, I suggested that the 29.4 percent cut in fees for doctors who treat Medicare patients — one of the main sources of savings in Obamacare — may result in fewer doctors willing to treat Medicare patients or in Medicare patients receiving lower quality care. In this new paper, “The Doctor Might See You Now: The Supply-Side Effects of Public Health Insurance Expansions,” Prof. Craig Garthwaite of the Kellogg School of Management at Northwestern University studies that exact question.
In order to estimate how PPACA will affect physician behavior, Garthwaite looked at the State Children’s Health Insurance Program (SCHIP), which, like PPACA, represented a large increase in the number of Americans receiving public health insurance coverage. His findings confirm the prediction that the expansion of public health insurance programs will likely lead to a decrease in the quantity of medical services provided by physicians even though it increases physicians’ participation.
Following the implementation of SCHIP, pediatricians with little previous participation in the Medicaid program decreased the number of weekly hours spent on patient care. Evidence from the NAMCS suggests that physicians’ labor supply decrease plays out through shorter visits with each patient. Overall, the introduction of new public health insurance programs may simply change the nature of patient physician interactions—for example, physicians could rely on physician assistants and registered nurses to provide more basic medical services. Additional research is needed to investigate the welfare effects of the program change.
Why does this matter?
Results from this paper can help economists and policymakers understand physician responses to policy changes such as the public health insurance expansion contained in the recently-passed PPACA in the United States. While many policies are being implemented simultaneously in the PPACA, results from my current study suggest that the effect of the public insurance expansion-related changes should increase physician participation in the program but lower physician labor supply. This information should be integrated into any analysis of the overall effect of the legislation.
An interesting side note: Many states implemented SCHIP through the expansion of income limits for the existing state Medicaid program. The paper has some good data and references about how doctors responded to the increase in Medicaid eligibility:
Cunningham and May (2006) [link to the paper here] found that from 1996 to 2005 the percentage of physicians reporting no Medicaid patients (as defined by practice revenue) increased by 13 percent. Over the same time period, the percentage of physicians reporting that they were not accepting new Medicaid patients increased from 19.4 to 21 percent. The increase was largest for physicians who reported receiving little revenue from Medicaid.
What this means is that any additional negative effects of decreased physician labor supply following the implementation of the PPACA are likely be worse for Medicaid patients. These patients are covered by a program that already increasingly isn’t accepted by doctors.