Working Paper: NBER ID: w24354
Authors: David C. Chan Jr.; Michael J. Dickstein
Abstract: In setting prices for physician services, Medicare solicits input from a committee that evaluates proposals from industry. We investigate whether this arrangement leads to prices biased toward the interests of committee members. We find that increasing a measure of affiliation between the committee and proposers by one standard deviation increases prices by 10%, demonstrating a pathway for regulatory capture. We then evaluate the effect of affiliation on the quality of information used in price-setting. More affiliated proposals produce less hard information, measured as lower quality survey data. However, affiliation results in prices that are more closely followed by private insurers, suggesting that affiliation may increase the total information used in price-setting.
Keywords: Medicare; Regulatory Capture; Price Setting; Health Economics
JEL Codes: D71; H57; I13; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| affiliation (Y80) | price recommendations (P22) |
| affiliation (Y80) | quality of survey data (C83) |
| affiliation (Y80) | information used in price-setting (L11) |
| affiliation (Y80) | regulatory capture (G18) |