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1. Physician assistants have long argued that they have the ability to provide as much as 70 percent of the medical services provided by primary care physicians at a much lower cost, yet government regulations limit their ability to work independently of physicians. Explain what would happen to the level of competition in the physician services market if all the statutes limiting the activities of physician assistants were eliminated.

2. Discuss how enhanced competition in the physician services market may have affected the ability of physicians to induce the demand for medical services.

3. Analyze the alternative compensation schemes discussed in this chapter that private insurers use to pay physicians. Think in terms of how these different compensation schemes may affect the incentive of physicians to provide an excessive amount of medical services.

4. As you know, various medical groups are in the process of developing medical guidelines. Assuming guidelines are developed and widely adopted by physicians, how will this affect the physician services market?

5. Some argue that practice variations exist because information on practice style is disseminated slowly. Phelps (1992) argues that physicians should be allowed to patent and sell their practice strategies. Explain how this policy might affect practice variations.

6. Discuss the theoretical and empirical issues surrounding the supplier-induced demand theory.

7. Discuss the factors that have contributed to the increase in expenditures on physician services over the past decade.

8. Explain the many institutional and structural changes that might make physician licensing obsolete.

9. Use each of McGuire’s quantity setting models to explain how a physician is likely to react to price controls. In particular, explain how the physician continues to earn economic profits despite the implementation of price controls.

10. As we learned, MRI and CT scanning facilities have been growing at a fast pace over the last decade. Consider the case in which physicians make referrals to facilities in which they have an ownership stake. Identify and describe some of the incentives such arrangements provide to physicians. Are there countervailing forces that may act as controls on those incentives?