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Bleeding Hearts, Profiteers, or Both: Specialist Physician Fees in an Unregulated Market

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  • Meliyanni Johar
  • Chunzhou Mu
  • Kees Van Gool
  • Chun Yee Wong

Abstract

This study shows that, in an unregulated fee‐setting environment, specialist physicians practise price discrimination on the basis of their patients' income status. Our results are consistent with profit maximisation behaviour by specialists. These findings are based on a large population survey that is linked to administrative medical claims records. We find that, for an initial consultation, specialist physicians charge their high‐income patients AU$26 more than their low‐income patients. While this gap equates to a 19% lower fees for the poorest patients (bottom 25% of the household income distribution), it is unlikely to remove the substantial financial barriers they face in accessing specialist care. There are large variations across specialties, with neurologists exhibiting the largest fee gap between the high‐income and low‐income patients. Several possible channels for deducing the patient's income are examined. We find that patient characteristics such as age, health concession card status and private health insurance status are all used by specialists as proxies for income status. These characteristics are particularly important to further practise price discrimination among the low‐income patients but are less relevant for the high‐income patients. Copyright © 2016 John Wiley & Sons, Ltd.

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  • Meliyanni Johar & Chunzhou Mu & Kees Van Gool & Chun Yee Wong, 2017. "Bleeding Hearts, Profiteers, or Both: Specialist Physician Fees in an Unregulated Market," Health Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 528-535, April.
    • Handle: RePEc:wly:hlthec:v:26:y:2017:i:4:p:528-535
    DOI: 10.1002/hec.3317
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    1. Astrid Kiil & Kurt Houlberg, 2014. "How does copayment for health care services affect demand, health and redistribution? A systematic review of the empirical evidence from 1990 to 2011," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(8), pages 813-828, November.
    2. Van Doorslaer, Eddy & Clarke, Philip & Savage, Elizabeth & Hall, Jane, 2008. "Horizontal inequities in Australia's mixed public/private health care system," Health Policy, Elsevier, vol. 86(1), pages 97-108, April.
    3. Meliyanni Johar & Glenn Jones & Elizabeth Savage, 2012. "Healthcare Expenditure Profile of Older Australians: Evidence from Linked Survey and Health Administrative Data," Economic Papers, The Economic Society of Australia, vol. 31(4), pages 451-463, December.
    4. Johar, Meliyanni, 2012. "Do doctors charge high income patients more?," Economics Letters, Elsevier, vol. 117(3), pages 596-599.
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    2. Susan J. Méndez & Jongsay Yong & Hugh Gravelle & Anthony Scott, 2024. "Medical pricing decisions: Evidence from Australian specialists," Melbourne Institute Working Paper Series wp2024n11, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Yu, Serena & van Gool, Kees & Hall, Jane & Fiebig, Denzil G., 2019. "Physician pricing behavior: Evidence from an Australian experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 20-34.
    4. Naghsh-Nejad, Maryam & van Gool, Kees, 2024. "Impact of time of diagnosis on out-of-pocket costs of cancer treatment, a side effect of health insurance design in Australia," Health Policy, Elsevier, vol. 145(C).
    5. Pulok, Mohammad Habibullah & van Gool, Kees & Hall, Jane, 2020. "Horizontal inequity in the utilisation of healthcare services in Australia," Health Policy, Elsevier, vol. 124(11), pages 1263-1271.
    6. Sabanovic, Hana & La Brooy, Camille & Méndez, Susan J. & Yong, Jongsay & Scott, Anthony & Elshaug, Adam G. & Prang, Khic-Houy, 2023. "“It's not a one operation fits all”: A qualitative study exploring fee setting and participation in price transparency initiatives amongst medical specialists in the Australian private healthcare sect," Social Science & Medicine, Elsevier, vol. 339(C).
    7. Denzil G. Fiebig & Kees van Gool & Jane Hall & Chunzhou Mu, 2021. "Health care use in response to health shocks: Does socio‐economic status matter?," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3032-3050, December.
    8. Naghsh Nejad, Maryam & Yu, Serena & Haywood, Philip, 2023. "Provider Responses to the Expansion of Public Subsidies in Healthcare: The Case of Oral Chemotherapy Treatment in Australia," IZA Discussion Papers 16060, Institute of Labor Economics (IZA).
    9. Olukorede Abiona & Phil Haywood & Serena Yu & Jane Hall & Denzil G. Fiebig & Kees van Gool, 2024. "Physician responses to insurance benefit restrictions: The case of ophthalmology," Health Economics, John Wiley & Sons, Ltd., vol. 33(5), pages 911-928, May.
    10. Pulok, Mohammad Habibullah & van Gool, Kees & Hall, Jane, 2020. "Inequity in physician visits: the case of the unregulated fee market in Australia," Social Science & Medicine, Elsevier, vol. 255(C).
    11. Callander, Emily J. & Shand, Antonia & Nassar, Natasha, 2021. "Inequality in out of pocket fees, government funding and utilisation of maternal health services in Australia," Health Policy, Elsevier, vol. 125(6), pages 701-708.
    12. Yong, Jongsay & Elshaug, Adam G & Mendez, Susan J & Prang, Khic-Houy & Scott, Anthony, 2024. "Sources of specialist physician fee variation: Evidence from Australian health insurance claims data," Health Policy, Elsevier, vol. 147(C).

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