'Taxing' Doctors: The Impact of Income Caps on the Provision of Medical Services

Boris Kralj (), Jasmin Kantarevic and Darrel Weinkauf ()
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Boris Kralj: Ontario Medical Assocation
Darrel Weinkauf: Ontario Medical Assocation

No 1784, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Income cap or threshold systems rely on incentives that encourage physicians to limit medical expenditures, but little is known about how physicians respond to these incentives. Conceptually, the threshold system is to physicians what an income tax system is to taxpayers. We exploit this similarity to analyze the impact of a reform that changed what is included in the 'taxable' billings of physicians in Ontario, Canada. We find that for services that the reform turned from exempted to non-exempted, the reform had a strong, negative impact for physicians with billings above the minimum threshold and a negligible impact for physicians below the threshold. The reform had no impact on services that were non-exempted both before and after the reform. This response of physicians to the threshold reform resembles the expected response of taxpayers to a similar change in the income tax system.

Keywords: non-convex budget sets; income thresholds; physicians' behavior (search for similar items in EconPapers)
JEL-codes: I10 I18 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2005-09
New Economics Papers: this item is included in nep-hea
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Published - published in: Canadian Journal of Economics / Revue canadienne d'économique, 2008, 41(4), 1262-1284

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