ABSTRACT
Many Blue Shield Plans offer participation agreements to physicians that are structurally similar to the participation provisions of Medicaid programs. This paper examines physicians' participation decisions in two such Blue Shield Plans where the participation agreements were on an all-or-nothing basis. The major results show that increases in the Plans' reasonable fees or fee schedules significantly raise the probability of participation, and that physicians with characteristics associated with "low quality" are significantly more likely to participate than are physicians with characteristics associated with "high quality." In this sense the results highlight the tradeoff that must be faced in administering governmental health insurance policy. On the one hand, restricting reasonable and scheduled fees is the principal current tool for containing expenditures on physicians' services. Yet these restrictions tend to depress physicians' willingness to participate in government programs, thereby reducing access to high quality care by the populations those programs were designed to serve.