Starve the Doctor - Starve the Baby?

Physician-induced demand is a central cost-efficiency issue in public health care programs but little is known about effects of remuneration systems on the ultimate outcome – patient health. Exploiting a unique combination of policy-induced variation and administrative records from Denmark, I investigate the impact of GP payment contracts on infants’ health. In a difference-in-differences framework, I find that first-born infants exposed in the womb to the care of GPs with capitation contracts have poorer infant health outcomes relative to infants exposed to fee-for-service contracts. Further I find the estimated effects primarily are driven by younger mothers.