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Do Doctors Induce Demand?

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  • Beomsoo Kim

    () (Department of Economics, Korea University, Seoul, South Korea)

Abstract

There is a huge variation in medical utilization across geographic areas in the U.S. In addition, supply of medical care is positively correlated with demand. One commonly suspected possibility is physicians induce demand using their superior medical knowledge. This paper tests the supply induced demand in medicine using the exogenous negative income shock to Obstetrics/Gynecologists due to the declining number of births in their practice area. The number of births declined more than 8 % from 1989 to 1999 and physicians may decide to choose the cesarean section instead of normal delivery, as the cesarean section is reimbursed at a higher pay rate. Physicians might also provide more prenatal care than medically necessary in order to make up their own income under the fee for service reimbursement mechanism. Some evidence of induced demand in OB/GYNs practice pattern has been found. It has been found that the cesarean section would increase by 0.5 percentage points with a unit decline of birthrate per a population of 100, but prenatal care visits did not change.

Suggested Citation

  • Beomsoo Kim, 2009. "Do Doctors Induce Demand?," Discussion Paper Series 0901, Institute of Economic Research, Korea University.
  • Handle: RePEc:iek:wpaper:0901
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    File URL: http://econ.korea.ac.kr/~ri/WorkingPapers/w0901.pdf
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    References listed on IDEAS

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    1. Diana S. Lien & William N. Evans, 2005. "Estimating the Impact of Large Cigarette Tax Hikes: The Case of Maternal Smoking and Infant Birth Weight," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    2. Garrett, Thomas A., 2003. "Aggregated versus disaggregated data in regression analysis: implications for inference," Economics Letters, Elsevier, vol. 81(1), pages 61-65, October.
    3. repec:aph:ajpbhl:1987:77:8:955-959_4 is not listed on IDEAS
    4. Cromwell, Jerry & Mitchell, Janet B., 1986. "Physician-induced demand for surgery," Journal of Health Economics, Elsevier, vol. 5(4), pages 293-313, December.
    5. 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.
    6. Beomsoo Kim, 2007. "The Impact of Malpractice Risk on the Use of Obstetrics Procedures," The Journal of Legal Studies, University of Chicago Press, vol. 36(S2), pages 79-119, June.
    7. Jonathan Gruber & Maria Owings, 1996. "Physician Financial Incentives and Cesarean Section Delivery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 99-123, Spring.
    8. Gruber, Jon & Kim, John & Mayzlin, Dina, 1999. "Physician fees and procedure intensity: the case of cesarean delivery," Journal of Health Economics, Elsevier, vol. 18(4), pages 473-490, August.
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    Cited by:

    1. Diana Cheung & Jean-Pierre Laffargue & Ysaline Padieu, 2016. "Insurance of Household Risks and the Rebalancing of the Chinese Economy: Health Insurance, Health Expenses and Household Savings," Pacific Economic Review, Wiley Blackwell, vol. 21(3), pages 381-412, August.
    2. Wen-Yi Chen, 2013. "Do caesarean section rates ‘catch-up’? Evidence from 14 European countries," Health Care Management Science, Springer, vol. 16(4), pages 328-340, December.

    More about this item

    Keywords

    supply induced demand; cesarean section; excessive prental care; fertility;

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I19 - Health, Education, and Welfare - - Health - - - Other
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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