Association for Public Policy Analysis & Management

The US health care system is characterized by a mix of private and public health insurers, with the latter payer group capturing a substantial and growing portion of the market. Because of their large roles, public health insurance programs can have widespread effects on both medical consumers and suppliers, and estimating these effects is key for ongoing policy efforts. However, the related literature to date is heavily focused on the demand-side consequences of these programs – leaving supply-side considerations less well-understood. Policy assessments are likely incomplete without a firmer grasp of public payers’ influence on medical providers’ behavior, and corresponding welfare calculations may be under- or overstated when neglecting supply-side consequences. Any related effects also have direct implications on persistent provider supply and distribution concerns across the US.

A segment of the US market where public insurance has particular importance relates to child health services. For nearly 20 years, Medicaid and the state-based Child Health Insurance Program (CHIP) have jointly offered child coverage targeting lower income families. As the original 10-year CHIP time window began to close, roughly 40% of children were enrolled in a public health insurance program. While many have studied the demand-side effects from Medicaid and CHIP, much less empirical research has documented their influence on health care providers. This gap in the literature matters since public insurance expansions can shape labor market behavior and long-run decision-making for affected physicians.

In this paper, we use the 2009 CHIP Reauthorization Act to identify how the continued and expanding presence of a large public insurer affects a diverse set of provider labor supply decisions. We do so by leveraging unique data capturing the job market experiences of newly trained physicians from the largest training state in the US.

Our findings suggest pediatricians are acutely aware of public insurer policies and shape their practice decisions accordingly. More pediatric residents opt for sub-specialization, and pediatric generalists are more willing to enter financially risky practices (i.e., private practice and more rural private practice) after CHIPRA. The latter behavior, in particular, can have useful knock-on effects by restraining provider consolidation and encouraging more diverse provider allocation. We also argue that these behaviors reflect long-run financial considerations, rather than short-run payoffs.

Overall, our study uncovers several important policy spillover effects that have been previously unaccounted for. Newly trained pediatricians appear to benefit from more stably insured patients and less uncertain future revenues following a public payer expansion. As policy debates contemplate the survival of existing health insurance initiatives (e.g., CHIP) as well as introducing new reforms, sufficient discussion should be devoted to potential consequences that go beyond first-order effects on enrollees.