This dissertation addresses empirical issues on both the supply and demand side of the health care market. The first essay of the dissertation focuses on the supply side, namely male physicians and how they respond to labor supply as wage changes. The second part evaluates current Medicare policy, given the general health insurance market and interactions between the two, from an efficiency perspective.

On the supply side, we offer a new methodology to test two competing labor supply theories for physicians: the standard intertemporal model and target income model, where individuals have reference or target income which they try to achieve over time. The standard model predicts positive wage elasticities of labor supply, where as target income model exhibits negative wage elasticities. Our findings suggests that male physician’ exhibit target income behavior, namely, physician that are at or above their target income have inelastic wage elasticities of labor supply, where as physicians that are below their target income exhibit negative wage elasticities which leads them to work longer hours as reimbursement in lowered.

On the demand side we evaluate current Medicare policy. This paper is co-authored with Song Gao. The paper evaluates current Medicare policy, given the general health insurance market and interactions between the two, from an efficiency perspective. Using longitudinal data from the Health and Retirement Study (HRS) we track medical expenditures and health of adults just 4 years before enrollment into Medicare, upon entry, and a four years post entry by prior enrollment insurance status. Specifically we are interested in differences in cost and benefit outcomes of those who faced barriers to health care services prior to Medicare coverage and those who experienced smoother consumption trajectories. We follow individuals for a period of eight years, that is four years before entering Medicare and four years afterward.

We group them by their private health insurance status prior to entering Medicare, and compare their expenditures and health status biannually over the course of the study. We find that lack of private health insurance coverage before coming onto Medicare will result in a temporary greater increase in medical expenditures upon entry compared to those previously insured. At the same time, we observe relatively better self reported health among the uninsured at this time, which may be based on utilization. Effects are more significant for males than females. However, the trend disappears in the long-run so that both expenditures and health status converge after two years of enrollment, even after controlling for mortality. There may be efficiency gains to spreading costs of care over the life cycle rather than a jump at age 65 borne by the already constrained Medicare system—particularly given the growing number of new enrollees as the babyboomers enter the system.