CIP-Ecosocial Septiembre
ENLACES WEB
The medical profession has always provided a range of services at lower costs to some patients than others, from situations where many doctors provided free services to the indigent, to the ‘honorary’ specialists who, in the past in Australia, provided their services free in public hospitals. Under current arrangements, GPs who bulk bill some people and not others may be operating in a purely income maximising way, but may also be providing reduced fees to certain patients due to feelings of charity towards needy patients.
This debate has a long standing. Economists argue that the price differentiation is simply due to doctors optimising their incomes when different groups of patients have different price elasticities. Others, including both the Australian and American Medical Associations, argue the differentiation is due at least in part to altruism. Kessel (1958) discussed some of the history, and argued that the restrictive activities of the American Medical Association were part of the process. The published research on the subject, however, is limited.
Jones (2002, p. 624) writing in the British Medical Journal, discussed the theory of
altruism and of co-operative behaviour in general, but noted:
“Altruistic behaviour by physicians might include, for example, continuing to work or providing informal medical advice outside contracted hours, giving free treatment to poor patients in fee for service healthcare systems, and a general willingness to go the extra mile in professional activities. There is much evidence that many doctors work beyond their contracted hours, there is also a growing feeling that altruism in medicine, if not dying, is at least declining.
This might be expressed, for example,…in the general decline in home visiting rates by general practitioners, or in the recent explicit choices made by young doctors in balancing professional and domestic commitment. Generation X is making a cool appraisal of the costs and benefits of a medical career.”
Data for Australia show an ongoing decline in home visits, that young GPs provide fewer services than older GPs, and that there is a trend to GPs of all ages providing
Hurley et al. (2006) show similar results for Canada. Anecdotally, there is strong
evidence that young doctors in Australia do not want to work the hours their predecessors worked.
Ruffin & Leigh (1973) developed a charity–competition model in which price discrimination emerged as a consequence of utility maximisation. Ruffin and Leigh argued that Kessel (1958), who developed a monopoly price discrimination model, overlaid with strong views about the cartel role of the American Medical Association and its power to influence its members, “has neither conclusively rejected the charity model nor decisively established the monopoly model.”(p. 215).
They set up a model based on the assumption that the utility function for each doctor depended on the price charged to each group of patients, and that there was positive utility in charging low income patients a low price and negative utility in dealing with high income patients even at high prices. Their assumptions led to “a competitive model in which a homogenous product is sold at three distinct prices.” (p. 218).
Masson & Wu (1974) followed Ruffin and Leigh and provided a model of price discrimination based on different price elasticities of different groups, to which they added a charity component. Masson and Wu discounted the Ruffin and Leigh approach as they argued that it is based on the view that physicians were price takers. While the approach was in some ways more simplistic than Ruffin and Leigh, in setting the arrangement around the price setting capacity of the physician it was more realistic.
Culler & Ohsfeldt (1986) took the argument further by introducing the Becker (1965) theory of the allocation of time. The model was based on the notion that the physicians’ utility functions included demand for the commodity “consumption of medical care by the indigent”, and assumed that this demand was fixed, but its components – “medical care provided to the poor directly, and …monetary contribution to others who provide medical services to the poor” – were variable and depended (among other things) on the opportunity cost of the physician’s time. They used data from surveys of physicians which allowed them to model the physician’s provision of identified charity care against the physician’s hourly wage (seen to be the opportunity cost of their time). Their
modelling consistently showed significant negative coefficients for the wage variables, which they interpreted as showing that higher opportunity costs reduced the level of
charity provided through own services (and, by extension, more charity provided through direct financial contribution). Culler & Ohsfeldt (1986) were more supportive of the view that services provided to the indigent at low prices were real charity, and less supportive of the view that these services were a means of attracting patients or of obtaining a more varied practice experience.
The Culler & Ohsfeldt (1986) conclusions were challenged by Emmons & Rizzo (1993), who argued that their interpretation of Becker (1965) was not correct, and the results that they derived generate ambiguous conclusions with respect to the actual meaning of charity for physicians. They both repeated the empirical analysis with the data used by Culler and Ohsfeldt, and undertook a further analysis with more recent data. They found that the level of charity work was not correlated with wages in either year. These results mean that the Becker approach does not provide any assistance in deciding whether services provided below cost (which were clearly provided by doctors in the American situation being modelled) were provided for reasons of charity or for other reasons.
The literature therefore gives little direction on how to accommodate charity, except for Masson and Wu’s view that it should be, in effect, simply added to the benefit a
physician obtains from providing a charity type service as if it were a financial reward. Later in the thesis, a demand equation is estimated which includes an interaction between price and concession card holding, which shows there are differential
elasticities which would be consistent with the basic price discrimination view. It is not practical with the available Australian data to directly assess the role of altruism.