Association for Public Policy Analysis & Management

The U.S. health care system expends $3 trillion annually, with almost half of this spending publicly financed. The sheer magnitude of public dollars devoted to health care has placed public health insurance programs at the center of many policy discussions. Health reforms implemented under the Affordable Care Act, especially Medicaid expansions, have raised a number of policy questions and concerns for how the system will accommodate the millions of newly insured. At the same time, other trends and developments are reshaping the U.S. health care landscape. New payment models are being introduced, and various institutions and provider organizations are both integrating and consolidating across the country. While these evolving aspects of health care have caught the attention of researchers and policy-makers, almost no empirical studies have examined them together.

Mechanisms and determinants of physicians’ willingness to supply services to the Medicaid market are not well understood. Over 10 million new beneficiaries have been enrolled in Medicaid through 2014 with additional increases expected in the coming years. However, significant shares of physicians refuse to accept Medicaid payment or limit the number of Medicaid patents they see. Several reasons are commonly given to explain this phenomenon (e.g., less generous reimbursement), but unexplored factors remain.  Both the market environment a given physician faces in terms of other providers competing for the same patients as well as bargaining positions with local private insurers may be important to consider in explaining Medicaid participation. Each can influence the relative attractiveness of additional Medicaid business and, importantly, other recent supply-side trends (e.g., vertical integration and horizontal consolidation) may further alter the financial incentives for delivering more Medicaid services.

This study leverages multiple unique data sources to extensively explore the role of physician market structure, provider consolidation, and physician-commercial insurer bargaining on primary care physician office’s Medicaid participation. We first utilize data from an audit study, which uses a randomized design to track patient access from different insurance groups across and within 10 states. We then use a national database of physicians to construct measures of primary care market competition within these states. This database further provides a rich set of organizational characteristics such as physician group size and vertical integration with health systems that allow for more nuanced measurements of competition. Finally, we incorporate insurer data capturing local enrollment numbers by issuer to identify markets with a dominant private payer.

Preliminary analyses indicate that these market features have meaningful influence over the likelihood of accepting a new Medicaid patient – influences not found among patients with private insurance. For example, a dominant private insurer in the market is associated with a 5 – 10 percentage point increase in the willingness to see a new Medicaid patient. We also show that not accounting for provider organization and integration in measures of competition substantially changes inferences. Ongoing policy and research efforts will need to consider dynamics and incentives related to provider competition in order to more fully understand how the health care system will absorb a growing Medicaid population.