The Effects of Population Aging on the Physician Services Market: A Computable Equilibrium Analysis

This paper formulates a computable equilibrium model (CEM) of the market for physician services. The simulation results based upon the CEM are consistent with widely held beliefs about the effects of aging on the health care sector, for example, that aggregate expenditures will increase as the population ages. In addition, however, the simulations suggest differential effects on prices and expenditures for various types of services and on expenditures by different types of consumers. For example, prices and aggregate expenditures for services typically used by the elderly are found to increase under “older” age distributions, whereas prices and aggregate expenditures for other services are found to decrease. Elderly women are found to be unequivocally worse off under older as opposed to younger age structures; they spend more yet consume fewer services.