Volume 13, (Supplement) 1978
Newhouse, Joseph P., and M. Susan Marquis. 1978. "The Norms Hypothesis and the Demand for Medical Care." Journal of Human Resources 13(S):159-182.
Our results cast doubt on the validity of the norms hypothesis--that physicians treat patients in accordance with the average or modal insurance coverage in an area. The one study in the literature directly supporting this hypothesis is misspecified; when more correctly specified, it provides no support for the hypothesis. Two versions of the hypothesis are distinguished. The stronger maintains that physicians do not take account of within-area variation in insurance coverage. This version is firmly rejected by the data. A weaker version says that the physician does take account of within-area variation but that between-area differences in average coverage have an independent effect on demand. Little or no support is found for this version, but our data do not permit very powerful tests.
The authors are in the Economics Department of the Rand Corporation. The authors are grateful to Will Manning and Carl Morris for assistance in computing results for the experimental data. Uwe Reinhardt and the participants in the Conference on the Economics of Physician and Patient Behavior made helpful comments on an earlier draft. The research reported herein was performed pursuant to the Health Insurance Study grant from the U.S. Department of Health, Education, and Welfare. The opinions and conclusions expressed herein are solely those of the authors and should not be construed as representing the opinions or policy of any agency of the United States government.
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