Health insurance and physicians’ practice location choice: A natural experiment in Japan

We examine how the large expansion of a medical subsidy program changes the behavior of primary care physicians. Since 2000, Japan, has seen a rapid development of a local subsidization program known as the Medical Subsidy for Children and Infants (MSCI), which substantially reduces out-of-pocket expenses for children’s healthcare utilization. Using a census of clinics from 1999 to 2011 matched with municipality-level eligibility criteria for the MSCI, we show that the MSCI increases the monthly number of visits per clinic. However, MSCI increased the likelihood that physicians would choose to open clinics in more densely populated areas, suggesting that expanding the generosity of the health insurance system may accelerate the concentration of physicians in urban centers. • We examine how the large expansion of a medical subsidy program (MSCI) changes pediatricians’ labor supply and practice location choice. • 1,096 changes of the MSCI eligible age in 614 municipalities are exploited for the identification. • The MSCI expansion increases the number of visits in clinics. • The number of consultation days and official business hours remain unchanged. • Pediatricians open their clinics in densely populated areas under the generous MSCI system.