Health Insurance Medicaid Optimal Ins (Theory)

How do claim denials affect physician willingness to accept Medicaid patients?

From a recent article in NBER by Dunn et al. (2021):

Observing the back-and-forth sequences of claims’ denials and resubmissions for past visits, we can estimate physicians’ costs of haggling with insurers to collect payments. Combining these costs with the revenue never collected, we estimate that physicians lose 17% of Medicaid revenue to billing problems, compared with 5% for Medicare and 3% for commercial payers. Identifying off of physician movers and practices that span state boundaries, we find that physicians respond to billing problems by refusing to accept Medicaid patients in states with more severe billing hurdles. These hurdles are just as quantitatively important as payment rates for explaining variation in physicians’ willing to treat Medicaid patients.

In short, not only are Medicaid payment rates low, but the administrative hassle is also very high. Governments may believe that more strict claims administration saves money in the short-run, but Dunn and co-authors show that the impact of these policies on physician costs also appears to be very high.

Hat tip: Marginal Revolution.

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