Trading Spaces : Medicare’s Regulatory Spillovers on Treatment Setting for Non-Medicare Patients

Medicare pricing is known to indirectly influence provider prices and care provision for non-Medicare patients; however, Medicare's regulatory externalities are less well-understood. We study such implications by examining how physicians' outpatient surgery setting preferences respond to the removal of a Medicare ban on ambulatory surgery center (ASC) use for a specific procedure. Following the policy change, surgeons sharply reallocate targeted Medicare cases to ASCs and are up to 70% more likely to use ASCs for equivalent non-Medicare cases. Affected surgeons also shift other procedures outside of the regulation's scope to ASCs—consistent with diffuse distortionary effects from Medicare rulemaking