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

Author

Listed:
  • 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.

Suggested Citation

  • Kralj, Boris & Kantarevic, Jasmin & Weinkauf, Darrel, 2005. "'Taxing' Doctors: The Impact of Income Caps on the Provision of Medical Services," IZA Discussion Papers 1784, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1784
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    Keywords

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

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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