Stock Prices and the Doctor Supply: Effect of Medicare Residency Policy on Healthcare Industry Firms
AbstractFunding for medical residencies has been capped by US Congress since the late 1997, and has resultantly become an increasingly limiting factor of the doctor supply in the US. The resulting impact of Medicare residency policy on managed care firms, especially private insurers has been unclear. Using equity price data for healthcare firms listed in the S&P Health Index, I use the surprise introduction of the Resident Physician Shortage Reduction Act of 2009 and its proposed amendment to a major healthcare overhaul bill, to evaluate the market's assessment of expanded medical residency programs on the healthcare industry. Using tight three-day event study periods to look at when the bill was unexpectedly introduced in Congress and amended to the overhaul bill, I find Cumulative Average Abnormal Returns for Managed Care Firms of 10.9% and 4.2%, respectively, corresponding to an increase in total market value of approximately $5.5 billion and $2 billion. I also find that roughly 27% of the cost of the bill is passed on to firms while the remaining 73% is either passed on to consumers or lost to static inefficiencies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Becker Friedman Institute for Research In Economics in its series Working Papers with number 2011-011.
Date of creation: Dec 2011
Date of revision:
Legislatures; Voting Behavior; Information and Market Efficiency; Event Studies; Analysis of Health Care Markets; Industrial Policy;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Toni Shears).
If references are entirely missing, you can add them using this form.