Healing the Poor: The Influence of Patient Socioeconomic Status on Physician Supply Responses

48 Pages Posted: 1 Feb 2016

See all articles by Alice Chen

Alice Chen

University of Southern California - Schaeffer Center for Health Policy and Economics

Darius N. Lakdawalla

University of Southern California - Schaeffer Center for Health Policy and Economics; RAND Corporation; National Bureau of Economic Research (NBER)

Date Written: January 2016

Abstract

A longstanding literature explores how altruism affects the way physicians respond to incentives and provide care. We analyze how patient socioeconomic status mediates these responses. We show theoretically that patient socioeconomic status systematically influences the way physicians respond to reimbursement changes, and we identify the channels through which these effects operate. We use two Medicare reimbursement changes to investigate these insights empirically. We confirm that a given physician facing an increase in reimbursement boosts utilization by more when treating richer patients. We show that average supply price elasticities vary from 0.02 to 0.18 for a given physician, depending on the patient’s socioeconomic status. Finally, we show that the Medicare reforms we study led to overall reimbursement increases that raised healthcare utilization by 10% more for high-income patients compared to their low-income peers.

Suggested Citation

Chen, Alice and Lakdawalla, Darius N., Healing the Poor: The Influence of Patient Socioeconomic Status on Physician Supply Responses (January 2016). NBER Working Paper No. w21930. Available at SSRN: https://ssrn.com/abstract=2725708

Alice Chen (Contact Author)

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

Darius N. Lakdawalla

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

RAND Corporation ( email )

P.O. Box 2138
1700 Main Street
Santa Monica, CA 90407-2138
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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