Public Insurance Expansions and Labor Demand in Physician Practices

Existing research has examined the demand-side effects of ACA Medicaid expansions, but supply-side implications are not well-understood. Using a model of uncertain demand, we show how firms choose between fixed- and variable-cost labor investments. We empirically test the model predictions via a difference-in-differences strategy that uses Medicaid expansions and detailed staffing information on more than 129,000 physician practices. We find no substitution toward less expensive provider types whose employment carries fixed costs in the short run; instead, practices are 4–8 percent less likely to employ any nurse practitioner or physician assistant post-expansion. Small practices seem to drive the restrained labor demand effects.