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| Publications [#238866] of Frank A. Sloan
Journal Articles
- Sloan, FA; Steinwald, B, The Role of Health Insurance in the Physicians' Services Market,
Inquiry, vol. 12 no. 4
(December, 1975),
pp. 257-299
(last updated on 2025/05/31)
Abstract:
This paper provides a comprehensive analysis of both the structure and impact of health insurance in the physicians' services market. It summarizes previous studies, but also provides new evidence. Impetus for this study derives from two recently completed analyses of the determinants of physicians' fees. These studies found that, on the whole, insurance affects physicians' price setting decisions, and the effect varies considerably among different types of physicians and medical procedures. Parameter estimates of insurance variables in regression equations were sometimes erratic and hard to interpret. During data collection and related phases, however, two important facts emerged: many potentially important but poorly publicized dimensions of the insurance industry exist; and certain features of insurance policies cannot readily be portrayed through model estimation. Hence, the present study provides descriptive evidence as well as theoretical development and empirical tests of hypotheses related to the role of health insurance in the physicians' services market. The article presents evidence on how health insurance coverage relates to medical specialties and procedures, and on how insurance affects physician behavior. A simple model of physician price and output decisions is developed, then extended to incorporate important dimensions of insurance coverage. The concepts of average and marginal coinsurance in the major types of insurance policies are discussed: basic benefit and major medical. The model is used to estimate patient average and marginal coinsurance rates, based on representative insurance industry and physician fee data. Previously unknown relationships between physicians' fees and patients' out of pocket expenses are estimated. The two primary methods employed by insurers to set reimbursement limits for covered procedures under basic benefit programs are investigated: traditional fee schedules versus 'usual, customary, reasonable' reimbursement criteria. The relative inflationary effects of the two systems are assessed. Private and public insurance arrangements are examined in which the physician agrees to accept the insurer's reimbursement as payment in full. Physician motivation for participating in such agreements is explored. Results and policy implications are included.
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