A Study On SID And Its Correction In Health Care Sector

Physician-induced demand (PID, also written as SID in this paper) exists when the physician influences a patient's demand for care against the physician's interpretation of the best interest of the patient. Although SID, as a term in health care economics, is not widely known, it exists widely. In health care sector, there is a so-called Say's Law, that is, the supply of health care creates the demand for it, which is the shortest summarization.The reason why SID has been paid so much attention is that many researches show it is SID that causes the expenditure of health care increasing so fast. So, to slow down the increase, it is necessary to deal with SID. In theory, SID also presents implications for theoretical analysis. In general, increase in supply will cause movement of equilibrium point. But, if the suppliers have more information than the demand side and also provide health care service, they will have incentive make the demand side consume more service, or induce them to pay higher prices. In the case, increase in supply does not necessarily lead to the fall of the equilibrium price.Because of those, SID is a due action, and thorough research on SID is central to this paper. All the discussion in this paper goes as follows:A review on general theories of SID is presented in Chapter 1. The reason why supplier can induce demand is that health care possesses special characteristics. Generally, health care is very difficult to standardize, and is very random and uncertain, as well as asymmetric information in relative markets. Because of those, moral hazards can be easily seen in health care markets. The models can be categorized into 2 categories. One of them studies SID in the profit-maximization framework, and the other introduces the disutility of SID. In practice, not all SID aims to economic profits. The suppliers induce more medical checks and health care just in order to avoid litigation. This kind of SID does not provide direct economic profit the suppliers, but this also goes against the best interests of the consumers and decreases the risks or costs of the suppliers. Rice and many other researchers made much empirical research, and the conclusion is that the hypothesis of SID can be acceptable in general conditions.The analyses of SID in theory are presented in Chapter 2. Although SID is various, it can be described in a uniform form. In addition, the model of price rigidities also provides an explanation for SID. But these models cannot answer the question of to what extent SID will reach. To complete this model, some limiting factor has been added into the models. In the model of target income, the suppliers are assumed to chase a target income which cannot be interpreted in the model itself. And in Evans's model, SID will bring disutility to the suppliers.In the neoclassical framework, demand side is presumed not to be able to control suppliers'actions. But actually, demand side can only depend on supply side very limitedly. In addition, there are many suppliers in health care markets. If the consumers believe the suppliers are cheating them, they can switch another supplier. Thus the actions of the demand side can at least control the actions of the suppliers, which has been omitted in the former analyses. So, the analysis in this paper introduces game theory as a basic method. Thorough a process, it can be found that the actions of the suppliers can really be controlled, but this needs rigorous conditions.Empirical researches are summarized in Chapter 3. Generally, there are two methods that can be used to find evidence of SID. The first is the effects of MD/population ratio on the utilization of medical services. The second is medical fee. But empirical studies did not provide common results. The reason of this is that many important variables cannot be observed, or cannot be exactly estimated. The common method of testing SID is through exogenous shock, but this need to ensure that there is no SID before the shock. Because this cannot be ensured, even researches do not find obvious SID, the conclusion is still suspicious.As a useful makeup, researches on over-treatment widen the view of SID. Different from SID, over-treatment refers to the services provided exceed the actual needs of the consumers. Thus SID can be seen as the reason of over-treatment and the latter can be seen as the outcome of the former. In this point of view, researches on over-treatment are also researches on SID, but on a more complicated basis.Analyses through institutional method on SID are presented in Chapter 4. SID occurs between the demand side and the supply side, but it is the medical system that really determines SID. China government built massive medical insurance system in planned economy era, and achieved great success. In this period, there is no obvious evidence of SID, because the suppliers'revenue does not connect with the services they provide. In 1980s, China began to reform the medical service system. Medical institutions have to use their revenues to compensate their costs, SID thus appears everywhere, and over-treatment deteriorates. In this series of changes, the reform of property rights of medical institutions, government regulation, and so on, has brings massive effects on SID. Researches on these have great implications in policy studies.