Medicare Assignment Rates of Physicians: Their Responses to Changes in Reimbursement Policy

A physician's Medicare assignment rate is one measure of his or her willingness to participate in the Medicare program. The assignment rate reflects the proportion of services provided to Medicare beneficiaries for which the physician accepts the Medicare reasonable fee as payment in full. Generally, Medicare reasonable fees are lower than the payment which a physician receives from providing the same service to a private patient or to a Medicare patient who is not treated on assignment. Because Medicare eligibles not treated on an assigned basis are financially liable for the difference between the physician's charge and the Medicare reasonable fee, the assignment rate is an indication of the out-of-pocket costs borne by Medicare eligibles. One factor which may affect the willingness of physicians to accept patients on assignment is the difference between the reimbursement which he or she may receive in the private market and the fee received from treating Medicare eligibles on assignment. Throughout this paper we assume that the physician's private price or billed charge is equivalent to the level of reimbursement received from treating privately insured patients and Medicare non-assigned patients. Since the level of reimbursement is generally no greater than the billed charge and may be less, this assumption may overstate the actual reimbursement received by the physician. In all instances, reimbursement refers to the aggregate amount received by the physician from all sources for a given service. The lower a physician's Medicare reasonable fee relative to the private market fee the less willing he/she may be to participate in Medicare assignment. This paper examines the effect of changes in Medicare reimbursement on the assignment rates of physicians. It also predicts Medicare assignment rates under a policy option which would increase Medicare reasonable fees to the level of prevailing fees.