Supply-side Effects from Public Insurance Expansions: Evidence from Physician Labor Markets

Medicaid and the Child Health Insurance Programs (CHIP) are key sources of coverage for U.S. children. Established in 1997, CHIP allocated $40 billion of federal funds across the first 10 years but continued support required reauthorization. After 2 failed attempts in Congress, CHIP was finally reauthorized and significantly expanded in 2009. Although much is known about the demand-side policy effects, much less is understood about the policy's impact on providers. In this paper, we leverage a unique physician dataset to examine if and how pediatricians responded to the expansion of the public insurance program. We find that newly trained pediatricians are 8 percentage points more likely to subspecialize and as much as 17 percentage points more likely to enter private practice after the law passed. There is also suggestive evidence of greater private practice growth in more rural locations. The sharp supply-side changes that we observe indicate that expanding public insurance can have important spillover effects on provider training and practice choices.