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Physician Financial Incentives and Cesarean Section Delivery

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  • Jonathan Gruber
  • Maria Owings

Abstract

The 'induced demand' model states that in the face of negative income shocks physicians may exploit their agency relationship with patients by providing excessive care in order to maintain their incomes. We test this model by exploiting an exogenous change in the financial environment facing obstetrician/gynecologists during the 1970s: declining fertility in the U.S. We argue that the 13.5% fall in fertility over the 1970-1982 period increased the income pressure on ob/gyns, and led them to substitute from normal childbirth towards a more highly reimbursed alternative, cesarean delivery. Using a nationally representative micro-data set for this period, we show that there is a strong correlation between within state declines in fertility and within state increases in cesarean utilization. This correlation is robust to consideration of a variety of alternative hypotheses, and appears to be symmetric with respect to periods of fertility decline and fertility increase.

Suggested Citation

  • Jonathan Gruber & Maria Owings, 1994. "Physician Financial Incentives and Cesarean Section Delivery," NBER Working Papers 4933, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4933
    Note: HC PE
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    References listed on IDEAS

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    1. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers 0015, Boston University - Industry Studies Programme.
    2. J Hurley & R Labelle & T Rice, 1990. "The Relationship Between Physician Fees and the Utilization of Medical Services in Ontario," Centre for Health Economics and Policy Analysis Working Paper Series 1990-04, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
    3. David Bloom & James Trussell, 1984. "What are the determinants of delayed childbearing and permanent childlessness in the United States?," Demography, Springer;Population Association of America (PAA), vol. 21(4), pages 591-611, November.
    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. repec:aph:ajpbhl:10.2105/ajph.69.9.864_2 is not listed on IDEAS
    6. Grytten, Jostein & Holst, Dorthe & Laake, Peter, 1990. "Supplier inducement : Its effect on dental services in Norway," Journal of Health Economics, Elsevier, vol. 9(4), pages 483-491, December.
    7. Jonathan Gruber, 1992. "The Efficiency of a Group-Specific Mandated Benefit: Evidence From Health Insurance Benefits for Maternity," NBER Working Papers 4157, National Bureau of Economic Research, Inc.
    8. Goddeeris, John H, 1984. "Medical Insurance, Technological Change, and Welfare," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 56-67, January.
    9. T Rice & R Labelle, 1989. "Do Physicians Induce Demand for Medical Service?," Centre for Health Economics and Policy Analysis Working Paper Series 18, Centre for Health Economics and Policy Analysis (CHEPA), McMaster University, Hamilton, Canada.
    10. McGuire, Thomas G. & Pauly, Mark V., 1991. "Physician response to fee changes with multiple payers," Journal of Health Economics, Elsevier, vol. 10(4), pages 385-410.
    11. Victor R. Fuchs, 1978. "The Supply of Surgeons and the Demand for Operations," NBER Working Papers 0236, National Bureau of Economic Research, Inc.
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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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