The Rising Price of Physicians' Services: A Reply
The three primary conclusions of my previous study can be summarized briefly. First, there appears to be a permanent excess demand for physicians' services. The observed prices and quantities are not points on the demand function and the market does not follow a Marshallian or Walrasian process of adjustment to remove the excess demand. Second, physicians' fees rise when patients' ability to pay improves through higher income or more complete insurance coverage. More than a third of the potential gain from improved insurance coverage has been dissipated by induced price increases. Third, the supply equation indicates that physicians reduce the quantity of services provided when fees rise. This in turn implies that government action to control physicians' fees may increase the quantity of services provided. Professors Brown and Lapan raise some questions about the research and about the first and third of these conclusions. However, a careful analysis of their note shows that the original conclusions can remain unchanged. Their own discussion, on the other hand, contains a number of serious errors.
- DOI
- 10.2307/1927503
- Volume
- 54 (1)
- Pages
- 105
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