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This paper considers the role of statistical discrimination as a potential explanation for racial and ethnic disparities in health care. The underlying problem is that a physician may have a harder time understanding a symptom report from minority patients. If so, even if there are no objective differences between Whites and minorities, and even if the physician has no discriminatory motives, minority patients will benefit less from treatment, and may rationally demand less care. After comparing these and other predictions to the published literature, we conclude that statistical discrimination is a potential source of racial/ethnic disparities, and worthy of research. [ABSTRACT FROM AUTHOR]

Health plans paid by capitation have an incentive to distort the quality of services they offer to attract profitable and to deter unprofitable enrollees. We characterize plans' rationing as a "shadow price" on access to various areas of care and show how the profit maximizing shadow price depends on the dispersion in health costs, individuals' forecasts of their health costs, the correlation between use in different illness categories, and the risk adjustment system used for payment. These factors are combined in an empirically implementable index that can be used to identify the services that will be most distorted by selection incentives. [ABSTRACT FROM AUTHOR]

Nearly ten years after the implementation of Medicare's Prospective Payment System (PPS), some of its major impacts remain hard to explain using existing economic models. We develop a simple model of the hospital's choice of intensity of care, which affects demand for admissions. The model suggests an important role for the level of prospective payment, independent of the effect of marginal incentives. Predictions from the model are compared first with aggregate utilization data from Medicare's PPS experience, and then with various hospital-level studies which control for interhospital differences in reimbursement rates. [ABSTRACT FROM AUTHOR]