title: Supply and demand factors in the determination of Medicare expenditures.
abstract: This article presents multivariate estimates of the effects of supply-side factors (e.g., provider reimbursement) and demand-side factors (e.g., beneficiary ability to pay) on state-level expenditures per enrollee in Medicare Part A and Part B. The results indicate that a 1 percent increase in elderly income significantly increases the propensity to use Medicare Part B services, resulting in a 0.45 percent increase in Part B expenditures per enrollee. By contrast, patients' ability to pay has a much weaker effect on Part A expenditures. Changes in provider reimbursement also exert a substantial effect on expenditures. A 1 percent rise in the Medicare Prevailing Charge Index raises Medicare Part B expenditures by 0.43 percent. Collectively, the findings of this study suggest that both limits on Medicare reimbursement to providers and increased beneficiary liability have substantial effects on Medicare costs. Whatever the merits of arguments for or against such controls, the responsiveness of Medicare expenditures to equal percentage changes in supply and demand factors appears to be of a similar order of magnitude.
authors.affiliation: Department of Epidemiology and Public Health, Yale University School of Medicine, New Haven, CT 06510-8034.
authors.forename: J A
authors.initials: JA
authors.lastname: Rizzo
mesh_terms: D000368:Aged; D003363:Cost Control / Q000379:methods; D017047:Cost Sharing; D005102:Health Expenditures; D006301:Health Services Needs and Demand / Q000191:economics / Q000706:statistics & numerical data*; D006801:Humans; D007182:Income; D007349:Insurance, Health, Reimbursement; D016015:Logistic Models; D016344:Medicare Part A / Q000191:economics / Q000706:statistics & numerical data*; D016345:Medicare Part B / Q000191:economics / Q000706:statistics & numerical data*; D017059:Models, Econometric; D012051:Reimbursement Mechanisms; D013675:Technology, High-Cost; D014481:United States