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The Effect of Cost Suppression under Universal Health Insurance on the Allocation of Talent and the Development of Expertise: Cosmetic Surgery in Japan

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  • J. Mark Ramseyer

Abstract

Japanese national health insurance provides universal coverage. This system necessarily entails a subsidy that dramatically raises the demand for medical services. In the face of the increased demand, the government suppresses costs by suppressing prices. Through biographical and income data on more than 4,000 Tokyo physicians, I explore the effect of this price suppression on the allocation of talent and the development of expertise. Crucially, this national health insurance does not cover services-like elective cosmetic surgery-deemed medically superfluous. Facing price caps in the covered sector but competitive prices in these "superfluous" sectors, the most talented doctors disproportionately shift into the "superfluous" sectors and there invest heavily in their expertise: cosmetic surgeons are more likely than other doctors (more likely even than noncosmetic plastic surgeons) to have attended a more selective medical school, to have served on a medical school faculty, to be board certified, and to earn high incomes. (c) 2009 by The University of Chicago. All rights reserved.

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  • J. Mark Ramseyer, 2009. "The Effect of Cost Suppression under Universal Health Insurance on the Allocation of Talent and the Development of Expertise: Cosmetic Surgery in Japan," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 497-522, August.
    • Handle: RePEc:ucp:jlawec:v:52:y:2009:i:3:p:497-522
    DOI: 10.1086/592005
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    1. Berndt, Ernst R. & Cutler, David M. & Frank, Richard G. & Griliches, Zvi & Newhouse, Joseph P. & Triplett, Jack E., 2000. "Medical care prices and output," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 3, pages 119-180, Elsevier.
    2. A. J. Culyer & J. P. Newhouse (ed.), 2000. "Handbook of Health Economics," Handbook of Health Economics, Elsevier, edition 1, volume 1, number 1.
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    Cited by:

    1. Daiji Kawaguchi & Tetsushi Murao & Ryo Kambayashi, 2014. "Incidence of Strict Quality Standards: Protection of Consumers or Windfall for Professionals?," Journal of Law and Economics, University of Chicago Press, vol. 57(1), pages 195-224.
    2. J. Brandon Bolen & Gregory Elliehausen & Thomas W. Miller, 2023. "Credit for me but not for thee: the effects of the Illinois rate cap," Public Choice, Springer, vol. 197(3), pages 397-420, December.
    3. Peter T. Leeson & Henry A. Thompson, 2023. "Public choice and public health," Public Choice, Springer, vol. 195(1), pages 5-41, April.
    4. J. Mark Ramseyer, 2014. "Litigation and Social Capital: Divorces and Traffic Accidents in Japan," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 11(1), pages 39-73, March.

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