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Supply and demand in physician markets: a panel data analysis of GP services in Australia.

McRae I, Butler JR - Int J Health Care Finance Econ (2014)

Bottom Line: The direct impact of GP density on demand, while significant, proves almost immaterial in the context of near vertical supply curves.The model is validated by comparing post-panel model predictions with actual market outcomes over a period of three years and is found to provide surprisingly accurate projections over a period of significant policy change.The study confirms the need to jointly consider supply and demand in exploring the behaviour of physician services markets.

View Article: PubMed Central - PubMed

Affiliation: Australian Primary Health Care Research Institute, Australian National University, Building 63, Cnr Mills and Eggleston Roads, Acton, Canberra, ACT , 0200, Australia, ian.s.mcrae@anu.edu.au.

ABSTRACT
To understand the trends in any physician services market it is necessary to understand the nature of both supply and demand, but few studies have jointly examined supply and demand in these markets. This study uses aggregate panel data on general practitioner (GP) services at the Statistical Local Area level in Australia spanning eight years to estimate supply and demand equations for GP services. The structural equations of the model are estimated separately using population-weighted fixed effects panel modelling with the two stage least squares formulation of the generalised method of moments approach (GMM (2SLS)). The estimated price elasticity of demand of [Formula: see text] is comparable with other studies. The direct impact of GP density on demand, while significant, proves almost immaterial in the context of near vertical supply curves. Supply changes are therefore due to shifts in the position of the curves, partly determined by a time trend. The model is validated by comparing post-panel model predictions with actual market outcomes over a period of three years and is found to provide surprisingly accurate projections over a period of significant policy change. The study confirms the need to jointly consider supply and demand in exploring the behaviour of physician services markets.

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The Medicare rebate as a floor price in markets for medical services
© Copyright Policy - OpenAccess
Related In: Results  -  Collection


getmorefigures.php?uid=PMC4125822&req=5

Fig1: The Medicare rebate as a floor price in markets for medical services

Mentions: The Medicare rebates effectively set a floor price for medical services in Australia (Butler 1994). In Fig. 1 the market for general practice services is described in a competitive market framework. The rebate is shown as a fixed subsidy per unit of medical service. The equilibrium market price or gross price and quantity traded are determined by the supply curve and the gross price demand curve . The vertical difference between and the net price demand curve is the Medicare rebate. The equilibrium net price (or out-of-pocket price) borne by the patient is given by (). If supply increases ceteris paribus then, in the absence of any direct effect of supply on demand (or supplier inducement), the market price will fall and the patient’s out-of-pocket expense will fall. If supply increases to in Fig. 1, the market price notionally falls to a level below the floor price but in practice, of course, falls to the floor price set by the Medicare rebate, and the net price to the patient is zero (the bulk-billing outcome). If the rebate is increased, will shift to the right causing to rise and to fall (not shown in Fig. 1).Fig. 1


Supply and demand in physician markets: a panel data analysis of GP services in Australia.

McRae I, Butler JR - Int J Health Care Finance Econ (2014)

The Medicare rebate as a floor price in markets for medical services
© Copyright Policy - OpenAccess
Related In: Results  -  Collection

Show All Figures
getmorefigures.php?uid=PMC4125822&req=5

Fig1: The Medicare rebate as a floor price in markets for medical services
Mentions: The Medicare rebates effectively set a floor price for medical services in Australia (Butler 1994). In Fig. 1 the market for general practice services is described in a competitive market framework. The rebate is shown as a fixed subsidy per unit of medical service. The equilibrium market price or gross price and quantity traded are determined by the supply curve and the gross price demand curve . The vertical difference between and the net price demand curve is the Medicare rebate. The equilibrium net price (or out-of-pocket price) borne by the patient is given by (). If supply increases ceteris paribus then, in the absence of any direct effect of supply on demand (or supplier inducement), the market price will fall and the patient’s out-of-pocket expense will fall. If supply increases to in Fig. 1, the market price notionally falls to a level below the floor price but in practice, of course, falls to the floor price set by the Medicare rebate, and the net price to the patient is zero (the bulk-billing outcome). If the rebate is increased, will shift to the right causing to rise and to fall (not shown in Fig. 1).Fig. 1

Bottom Line: The direct impact of GP density on demand, while significant, proves almost immaterial in the context of near vertical supply curves.The model is validated by comparing post-panel model predictions with actual market outcomes over a period of three years and is found to provide surprisingly accurate projections over a period of significant policy change.The study confirms the need to jointly consider supply and demand in exploring the behaviour of physician services markets.

View Article: PubMed Central - PubMed

Affiliation: Australian Primary Health Care Research Institute, Australian National University, Building 63, Cnr Mills and Eggleston Roads, Acton, Canberra, ACT , 0200, Australia, ian.s.mcrae@anu.edu.au.

ABSTRACT
To understand the trends in any physician services market it is necessary to understand the nature of both supply and demand, but few studies have jointly examined supply and demand in these markets. This study uses aggregate panel data on general practitioner (GP) services at the Statistical Local Area level in Australia spanning eight years to estimate supply and demand equations for GP services. The structural equations of the model are estimated separately using population-weighted fixed effects panel modelling with the two stage least squares formulation of the generalised method of moments approach (GMM (2SLS)). The estimated price elasticity of demand of [Formula: see text] is comparable with other studies. The direct impact of GP density on demand, while significant, proves almost immaterial in the context of near vertical supply curves. Supply changes are therefore due to shifts in the position of the curves, partly determined by a time trend. The model is validated by comparing post-panel model predictions with actual market outcomes over a period of three years and is found to provide surprisingly accurate projections over a period of significant policy change. The study confirms the need to jointly consider supply and demand in exploring the behaviour of physician services markets.

Show MeSH