Medical Providers’ Supply Curve in a Universal Healthcare System with Global Budgeting

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This paper investigates medical providers’ supply curve under universal healthcare system with global budgeting, which theory predicts to be either positive or negative sloping. Using the population data of medical providers’ services and exogenous shifted budgets in Taiwan, empirical evidence shows that the dentists and Chinese herb practitioners maintained positive sloping supply curves. Hospitals and clinics that practice Western medicine were found to have negative sloping supply curves. The latter results indicate medical providers have incentives to provide excessive services under global budgeting, even when this drives down the price of their services provided.