Research Seminar with Maggie Shi, PhD

The Limits of Spending Limits: Evidence from the Medicare Therapy Cap
Open to Penn Affiliates

12:00p.m. – 1:00p.m. ET February 4, 2025 In-Person Event

Colonial Penn Center Auditorium, 3641 Locust Walk, Philadelphia, PA

When delegating expenditure decisions, governments and firms frequently use spending limits to mitigate overspending, but still allow exceptions on a case-by-case basis. This paper studies such “soft” spending limits in the context of a Medicare policy which capped per-patient physical therapy spending. In its first year, the cap reduced spending by 8 percent and improved targeting on clinical need. However, these improvements are driven entirely by Medicare being discerning in issuing exceptions, rather than providers becoming more judicious about which patients to treat. Patients of larger providers receive relatively more care once the cap is in place, as larger providers have better documentation practices and can thus get exceptions more easily. We find evidence of learning-by-doing with the exceptions process: with experience, providers reduce denial rates by producing more documentation. This mitigates the provider size gap somewhat, but also reduces the effectiveness of the policy in subsequent years.

Co-sponsored with the Department of Health Care Management.

Please note: In-person attendance at this event is preferred. Virtual access will be provided to registrants who are unable to be on campus.


Maggie Shi, PhD

Assistant Professor, University of Chicago Harris School of Public Policy; Faculty Research Fellow, National Bureau of Economic Research

Maggie Shi, PhD is an Assistant Professor at the University of Chicago Harris School of Public Policy and a faculty research fellow at the National Bureau of Economic Research. She is a health economist who studies how policy decisions shape provider and patient behavior and the implications for healthcare cost and quality. She completed her PhD in Economics at Columbia University and was a postdoctoral fellow at the National Bureau of Economic Research prior to joining the Harris School.