Impact of the Change in Medical Care Provider Income on Provider Behavior and Patients Perception

This paper titled, “Impact of the Change in Medical Care Provider Income on Provider Behavior and Patients Perception”, investigates the impact of the change in the provider’s per-visit income on the provider’s behavior and on the patients’ perception of the providers’ behavior. I do this by taking advantage of a pre-2010 law regarding young adults aging out of their parent’s insurance plan at the age of 19. I use this natural experiment within the regression discontinuity framework to instrument for the change in per-visit revenue received by the medical care providers. I use a 14 year sample of unmarried young adults excluding full time students, from the Medical Expenditure Panel Survey (MEPS).

Prior literature established the link between the aging out of parent’s insurance coverage at age 19 and a significant decrease in insurance coverage of the patients being attended to by the medical care providers using the regression discontinuity framework. My paper takes this further by establishing a significant decrease in the per-visit income revenue received by medical care providers as the young adults’ age-out of their parent’s insurance coverage.

One advantage of the regression discontinuity design is that it corrects for the endogeneity of provider per-visit income in the model. Provider income is endogenous because it is likely correlated with unobserved provider and patient preferences. As a solution, the aging-out policy exogenously determines the financial status of the patients, where once the young adults reach the age of 19 they lose their insurance coverage. This change in status is not related to the physicians preference or patient preference, it is determined by the natural process of aging; it is an exogenous shock to the per-visit income received by providers. In the sample I use for this paper, the observable characteristics are smooth across the threshold of age 19, meaning the observations just above 19 and just below 19 are similar and comparable.

The contributions to the current literature made by this paper include the empirical methodology used to examine the causal relationship between the income received by providers and the treatment behavior of the providers. Another contribution made by this paper is the estimated causal relationships. I find that the statistically significant change in the providers’ per-visit revenue, with a magnitude of 16%, does not lead to a change in the providers’ treatment behavior; the supply-side of health care. It does, however, lead to big and statistically significant changes in the patients’ perception of their providers’ behavior; the demand-side of health care. This paper further contributes by investigating not just the behavior of the medical care providers, but also the patients’ perception of their providers’ behaviors. My findings suggest the patients perceive that their providers are less respectful of them, spend less time with them, and do not listen to them as much. This is important because it furthers the research into the connection between patients’ perception of their provider and their health outcomes, as it relates to trust and follow thorough in the treatment plan.