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Medicaid physician fees and the quality of medical care of Medicaid patients in the USA


When enacted in 1965, the original Medicaid legislation sought to finance access to mainstream medical care for the poor. I use data on visits to office-based physicians from the National Ambulatory Medical Care Survey in four years—1989, 1993, 1998 and 2003—to test the extent to which this goal has been achieved. Specifically, I test whether this goal has been achieved more in states that pay higher fees to physicians who treat Medicaid patients compared to states that pay lower fees. By comparing the treatment of Medicaid patients to that of privately-insured patients and by using state fixed effects, I am able to estimate the effects of changes in the generosity of Medicaid physician payment within a state on changes in access to care for Medicaid patients, therefore separating Medicaid’s effect on access to health care from any correlation between the Medicaid fee and other attributes of the state in which a patient lives. Using this method, I examine the effect of Medicaid fees on whether or not an office-based physician accepts Medicaid patients, on the fraction of a physician’s practice that is accounted for by Medicaid, and on the length of visit times with physicians. Results imply that higher Medicaid fees increase the number of private physicians, especially in medical and surgical specialties, who see Medicaid patients. Higher fees also lead to visit times with physicians that are more comparable to visit times with private pay patients.

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  1. The self pay category includes visits for which the expected source of payment is either self pay or no charge. In 1989, the private insurance category includes visits where the expected source of payment is Blue Cross/Blue Shield, Other Commerical Insurance, or a Prepaid Plan (HMO/IPA/PPO). It should be noted that in 1989 and 1993, NAMCS records any expected source of payment, while NAMCS 1998 and 2003 record only the primary expected source of payment. This should not affect the proportion of visits that are classified as Medicaid since Medicaid should be the primary and only source of payment for non-elderly patients on Medicaid, except for those also on Medicare. For patients on both Medicare and Medicaid, Medicare would act as the primary payor. Visits for these dual eligibles are dropped from the sample in all years.

  2. The study uses fee data for all states in 1989, 1993, 1998 and 2003, except is missing fee data for Arkansas, Delaware, Mississippi, Montana, Nebraska and Pennsylvania for 1993 and 1998, Arizona and Wyoming for 1989, 1993 and 1998, and Tennessee for 1993, 1998 and 2003. Data for Texas in 1998 was also dropped since the fee ratio for Texas for 1998 (1.46) appeared to be possibly erroneous compared to the fee ratios for Texas in 1989, 1993 and 2003 (of 0.88, 0.88, and 0.62 respectively).

  3. For 1993 and 1998, the primary care services sampled consist of: (1) Office Visit, New Patient, 30 Minutes (CPT 99203); (2) Office Visit, Established Patient, 15 Minutes (CPT 99213); (3) Office Visit, Established Patient, 25 Minutes (CPT 99214); (4) Office Visit, New Patient, 60 Minutes (CPT 99244); and (5) Electrocardiogram (CPT 93000). The weight for each service was defined as its share of 2000 Medicaid physician spending for the twenty states with the largest Medicaid spending. The service-specific Medicaid spending data for these states came from the Centers for Medicare and Medicaid Services. The method for calculating the average Medicaid primary care fee for 2003 was the same, although a slightly updated list of services was used (Zuckerman, McFeeters, Cunningham and Nichols 2004).

  4. These procedures are an intermediate office visit for an established patient, a subsequent hospital visit, a routine electrocardiogram, and a total hysterectomy.

  5. Since no more than 30 visits are sampled for each physician in NAMCS, the share of a physician’s patients that are on Medicaid is estimated with error. However, there does not seem to be a reason to expect the estimate of this fraction to be biased in any way, so that this measurement error in the dependent variable should not bias estimates of the contribution of the independent variables.

  6. Physician specialty dummies are Internal Medicine, Pediatrics, General Surgery, OB/Gyn, Orthopedic Surgery, Cardiology, Dermatology, Urology, Psychiatry, Neurology, Opththalmology, Otolaryngology, and Other Specialties, compared to General or Family Practice.

  7. For a description of the ultimate cluster method used to correctly estimate standard errors with the NAMCS data, see Hing et al. (2003).

  8. The coefficient on the fee ratio is 0.095 (with a standard error of 0.045) for medical and 0.095 (with a standard error of 0.039) for surgical specialties. For a detailed list of specialties included in the medical and surgical specialty categories, see Table IV in NCHS (2006).

  9. Although the outcome is dichotomous, I continue to use a linear model when estimating the effect of the Medicaid-to-Medicare fee ratio on whether or not a physician has at least one Medicaid visit since estimates from linear models are easily interpreted and presented. Estimates from logit models are available from the author, though show results that are very similar to results presented here.

  10. Although also potentially endogenous, I included a variable indicating whether or not the patient has seen the doctor before since new patients have longer visit times than established patients, presumably because of the time the doctor takes to record the medical history of new patients. Inclusion of this variable did not substantively affect the results, and I have chosen to omit it from what is reported.


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I am grateful for helpful suggestions from Catharine Burt, David Cutler, Douglas Elmendorf, Martin Feldstein, Richard Kronick, Joseph Newhouse, and two anonymous referees. The findings and conclusions in this paper are those of the author and do not necessarily represent the views of the Centers for Disease Control and Prevention.

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Correspondence to Sandra L. Decker.

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Decker, S.L. Medicaid physician fees and the quality of medical care of Medicaid patients in the USA. Rev Econ Household 5, 95–112 (2007).

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  • Medicaid
  • Physician care
  • Duration of visit

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  • I18