Effect of Increased Medicaid Fees on Physician Participation and Enrollee Service Utilization in Tennessee, 1985-1988

Integration of low-income persons, now covered largely through Medicaid, into mainstream provider networks requires sufficient numbers of physicians willing to serve them. This paper examines a 1986 change in fees in Tennessee that was aimed explicitly at increasing physician participation in Medicaid. County/monthly panel data from 1985-1988 were used to examine visits per enrollee, physician participation, and caseloads. Higher fees were found to lead to increased participation in both urban and rural countries, but were less effective in increasing the number of visits per enrollee in urban areas and physician caseloads in both urban and rural areas. A measure of the residential segregation of Medicaid enrollees within each county was found to have a negative influence on the number of visits per enrollee, on participation, and on caseloads when measured across all participating physicians.