1. Physician Specialization, Market Power and Public Expenditure on Health Care – Interim Progress

2. SLSL D L = VMP L MR Monopoly Seller of Labor Quantity of Labor Wage Lc Wc Li Wi Wm Lm

3. Monopsony Buyer of Labor Quantity of Labor Wage 0 VMP = D L SLSL MFC L mn Wc W mn Lc

4. SLSL VMP L MR Bilateral Monopoly Quantity of Labor Wage Lc Wc W mn Wm Lm D L = MRP L MFC Lmn

5. Hotelling Type Model of Specialization R 10 R 0 1.25.75 R 01

6. Modeling Background Level of specialization assumed dependent on the real level of expenditure on health care, the market structure (monopoly and monopsony power), and the real level of income. The level of specialization is defined as the number or proportion of physicians who are specialists. The market structure is indicated in two ways, by the proportion of expenditure on health that is public spending, and by the four-part classification in the text.

7. The Data OECD Database Limited selection of countries to those with extended data, nearly from ’67 thru ‘03 Data primarily used as proportions or natural logs of data. Included per capita income and expenditure. Allowed tables to be constructed with “filled in” data

8. Example 1 First example includes ln (number of specialists) as the dependent variable. Country observation data included the class as indicated in the text – HC1 is the traditional system; HC2 is national health insurance; HC3 is national health service.

9. Example 2 This example includes ln (proportion of specialists relative to physicians) as Dependent variable. Country observation data included the class as indicated in the text – HC1 is the traditional system; HC2 is national health insurance; HC3 is national health service.

10. Summary Existence of market power implies ambiguity with respect to realized outcomes Specialization could be too high or low given existence of market power Market power does not preclude either a socially optimal outcome or one that approximates the competitive outcome These examples show more work is needed regarding model and selection of variables, and data quality.