Varying health care provider objectives and cost‐shifting: the case of retail pharmacy in the US

John M. Brooks, Bernard Sorofman and William Doucette

Health Economics, 1999, vol. 8, issue 2, 137-150

Abstract: In this paper we investigate the relationship between health care provider objectives, cost‐shifting, and prices by exploring the relationship between state Medicaid pharmacy reimbursements and average prices paid by pharmacy retail customers for four distinct pharmaceutical products across the US in 1994. We develop a more general theory than past researchers to enable provider objectives to vary with Medicaid pharmacy reimbursement levels. We find that provider objectives and the direction of relationship between Medicaid pharmacy reimbursements and retail prices vary with Medicaid pharmacy reimbursement levels. At high Medicaid pharmacy reimbursement levels we find a consistent negative relationship across products. At low Medicaid pharmacy reimbursement levels, the direction of the relationship is product‐specific. As a result, policy‐makers should be aware that policies affecting reimbursements from government‐sponsored health insurance will also affect retail customers that include the uninsured. Paradoxically, for certain products if a state cuts a generous Medicaid reimbursement level this could hurt uninsured patients, whereas cuts in a stingy Medicaid reimbursement rate may help uninsured patients. Copyright © 1999 John Wiley & Sons, Ltd.

Date: 1999
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https://doi.org/10.1002/(SICI)1099-1050(199903)8:23.0.CO;2-7

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Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:8:y:1999:i:2:p:137-150

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