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'Taxing' Doctors: The Impact of Income Caps on the Provision of Medical Services

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Author Info

  • Kralj, Boris

    ()
    (Ontario Medical Assocation)

  • Kantarevic, Jasmin

    ()
    (Ontario Medical Assocation)

  • Weinkauf, Darrel

    ()
    (Ontario Medical Assocation)

Abstract

Income cap or threshold systems rely on incentives that encourage physicians to limit medical expenditures, but little is known about how physicians respond to these incentives. Conceptually, the threshold system is to physicians what an income tax system is to taxpayers. We exploit this similarity to analyze the impact of a reform that changed what is included in the 'taxable' billings of physicians in Ontario, Canada. We find that for services that the reform turned from exempted to non-exempted, the reform had a strong, negative impact for physicians with billings above the minimum threshold and a negligible impact for physicians below the threshold. The reform had no impact on services that were non-exempted both before and after the reform. This response of physicians to the threshold reform resembles the expected response of taxpayers to a similar change in the income tax system.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1784.

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Length: 39 pages
Date of creation: Sep 2005
Date of revision:
Publication status: published in: Canadian Journal of Economics / Revue canadienne d'économique, 2008, 41(4), 1262-1284
Handle: RePEc:iza:izadps:dp1784

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Keywords: non-convex budget sets; income thresholds; physicians' behavior;

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