NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Healing the Poor: The Influence of Patient Socioeconomic Status on Physician Supply Responses

Alice Chen, Darius N. Lakdawalla

NBER Working Paper No. 21930
Issued in January 2016, Revised in February 2019
NBER Program(s):The Program on Aging, The Health Care Program, The Health Economics Program

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.

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Document Object Identifier (DOI): 10.3386/w21930

Published: A. Chen & D. Lakdawalla, 2017. "SAVING LIVES OR SAVING MONEY? UNDERSTANDING THE DUAL NATURE OF PHYSICIAN PREFERENCES," Innovation in Aging, vol 1(suppl_1), pages 1343-1343.

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