Supply and demand in physician markets: a panel data analysis of GP services in Australia
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Supply and demand in physician markets: a panel data analysis of GP services in Australia Ian McRae · James R. G. Butler
Received: 21 May 2013 / Accepted: 26 April 2014 © The Author(s) 2014. This article is published with open access at Springerlink.com
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 −0.19 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. Keywords GP markets · Panel data · Australia · Demand for physician services · Supply of physician services JEL codes
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I. McRae (B) Australian Primary Health Care Research Institute, Australian National University, Building 63, Cnr Mills and Eggleston Roads, Acton, Canberra, ACT 0200, Australia e-mail: [email protected] J. R. G. Butler Australian Centre for Economic Research on Health, The Australian National University, Building 62, Cnr Mills & Eggleston Roads, Acton, Canberra, ACT 0600, Australia
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I. McRae, J. Butler
Introduction The operation of markets for medical care services has been an object of research in health economics for many years, and underlies decisions on health care system structures and financing. All financing decisions in health care are based, implicitly or explicitly, on underlying assumptions about the supply and demand response of the health care system. Many papers (e.g. Hadley and Reschovsky 2006; Godager et al. 2009; Baltagi et al. 2005) have particularly explored the physician supply response to changing fee structures, but few have explored joint demand and supply responses. The purpose of this work is to extend these previous studies to show that, in a general practice market with insurance rebates and flexible pricing, it is possible to model both the supply and demand responses of the market to external changes, and to explore how they interact to arrive at the final outcome of these changes. Peripherally, the study also explore
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