Physician Responses to a Floor Price Adjustment : Evidence from Australia's Medicare Program

Using Australian general practitioners (GPs) as a case study, this paper examines the impact of a public subsidy withdrawal on provider behaviour. The removal of the joint injection item from public insurance provides an opportunity to examine behavioural changes in the context of the removal of a specific rebate while all other services are unaffected. We focus our analysis on GPs who continue to prescribe intraarticular steroids after the implementation of the policy. Using administrative data, we examine whether GPs change their billing practice and/or fees for services remaining under the universal insurance program to compensate for potential policy–induced income losses in the short–term. The estimated results for changes in billing pattern and payments provide evidence in support of physicians protecting their revenue base while not increasing the out-of-pocket cost for their patients