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Health Insurance Status and Physician-Induced Demand for Medical Services in Germany: New Evidence from Combined District and Individual Level Data

  • Hendrik Jürges

Germany is one of the few OECD countries with a two-tier system of statutory and primary private health insurance. Both types of insurance provide fee-for-service insurance, but chargeable fees for identical services are more than twice as large for privately insured patients than for statutorily insured patients. This price variation creates incentives to induce demand primarily among the privately insured. Using German SOEP 2002 data, I analyze the effects of insurance status and district (Kreis-) level physician density on the individual number of doctor visits. The paper has four main findings. First, I find no evidence that physician density is endogenous. Second, conditional on health, privately insured patients are less likely to contact a physician but more frequently visit a doctor following a first contact. Third, physician density has a significant positive effect on the decision to contact a physician and on the frequency of doctor visits of patients insured in the statutory health care system, whereas, fourth, physician density has no effect on privately insured patients' decisions to contact a physician but an even stronger positive effect on the frequency of doctor visits than the statutorily insured. These findings give indirect evidence for the hypothesis that physicians induce demand among privately insured patients but not among statutorily insured.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.56554.de/diw_sp0008.pdf
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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 8.

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Length: 30 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp8
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  1. John Mullahy, 1997. "Instrumental-Variable Estimation Of Count Data Models: Applications To Models Of Cigarette Smoking Behavior," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 586-593, November.
  2. McCarthy, Thomas R., 1985. "The competitive nature of the primary-care physician services market," Journal of Health Economics, Elsevier, vol. 4(2), pages 93-117, June.
  3. Mullahy, John, 1986. "Specification and testing of some modified count data models," Journal of Econometrics, Elsevier, vol. 33(3), pages 341-365, December.
  4. Yip, Winnie C., 1998. "Physician response to Medicare fee reductions: changes in the volume of coronary artery bypass graft (CABG) surgeries in the Medicare and private sectors," Journal of Health Economics, Elsevier, vol. 17(6), pages 675-699, December.
  5. Winfried Pohlmeier & Volker Ulrich, 1995. "An Econometric Model of the Two-Part Decisionmaking Process in the Demand for Health Care," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 339-361.
  6. Pauly, Mark V., 1994. "Editorial: A re-examination of the meaning and importance of supplier-induced demand," Journal of Health Economics, Elsevier, vol. 13(3), pages 369-372, October.
  7. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  8. Stano, Miron, 1985. "An analysis of the evidence on competition in the physician services markets," Journal of Health Economics, Elsevier, vol. 4(3), pages 197-211, September.
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