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PADSIM: The Health Care Payment and Delivery Simulation Model

Sweeping legislation proposed at the state and federal levels would affect health insurance coverage and alter how health plans pay for care. To estimate the effects of these changes on coverage and demand for care, policymakers have had several tools at their disposal, including RAND's COMPARE microsimulation model. But until recently, such models could not estimate how provider behavior would change in response to policy changes. RAND's Payment and Delivery Simulation Model (PADSIM) fills that gap.

What Does PADSIM Do?

PADSIM takes the concept behind COMPARE and applies it to health care providers. The model gives policymakers a window into how providers would respond to changes in patient demand and payment generosity by changing the amount of health care services they offer.

PADSIM estimates the combined effect of policies that affect health care demand (such as health insurance coverage expansions) and supply (such as expansions of value-based payment) on the actual use and cost of services. Providers might choose, for example, to stop taking new patients or certain types of patients if payment rates are reduced. Such provider choices would shrink the pool of available physicians and increase demand for those services. By quantifying the gap between patients' demand for services and providers' desired output, PADSIM measures the pressures on health care access that could include effects on wait times, or difficulty in getting an appointment.

What Data Go Into PADSIM?

PADSIM is designed for analysis at the national or state level without requiring any special calibration. Sources of data on the number of providers and their revenues include:

  • Medicare hospital cost reports and the State Health Expenditures Accounts from the Centers for Medicare & Medicaid Services (CMS)
  • National Income and Product Accounts from the Bureau of Economic Analysis
  • Area Health Resources File from the Health Resources & Services Administration, and
  • Economic Census and County Business Patterns from the U.S. Census Bureau

PADSIM integrates these provider data with person-level survey data from the Current Population Survey and the Medical Expenditure Panel Survey, and with tax payments by households simulated using the National Bureau of Economic Research's TAXSIM. The result is an integrated platform for projecting health care utilization, financing, and revenues under alternative policy scenarios.

PADSIM in Practice

Combining PADSIM with COMPARE gives policymakers a more complete picture of policy effects than previously available. It has already been used to estimate:

Further technical detail about the model was published in 2016.