Physician acceptance of Medicare patients on assignment

The determinants of the assignment rates of physician services under Medicare are analyzed in this paper. A theoretical model of physician behavior is developed to capture the carrot and stick nature of the assignment decision resulting from the uncertainty of patient payment. The optimization conditions of the physician's problem indicate that assignment rates are determined by market prices, Medicare fees, and physicians' assessments of their patients' payment likelihoods. The theoretical findings are tested using an empirical model based on observed prices and selected proxy variables for the probability of payment. Results, based on a Tobit analysis that predicts elasticities for the price and proxy variables, are consistent with the theoretical model implying that economic incentives and patient payment probabilities are important determinants of assignment rates.