Evaluation of Natural Experiment to Raise Medicaid Fees for Physicians

What impacts do increased Medicaid physician reimbursements have on the availability of, access to, and total costs of primary care? The researchers evaluated a 1986 "natural experiment" in Tennessee, wherein Medicaid physician fees for primary care were raised by 50% in nominal terms and by 25% relative to Medicare. The objectives of this project were to (1) assess whether increased reimbursement leads office-based providers of primary care to be more willing to treat Medicaid patients; (2) assess whether beneficiaries respond by shifting their site of care from hospitals to outpatient office settings; (3) estimate the savings from any shift in the site of care; and (4) estimate the "offset effect" (the extent to which increased physician reimbursement for primary care increases total Medicaid payments for such care). The results provided valuable information about the potential cost and effects of increasing Medicaid fees. The study also revealed whether replacing Medicaid with a public program that reimburses providers at the same level as private insurers can be expected to ensure reasonable access to office-based care for the poor.