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Healthcare Demand under Simple Prices: Evidence from Tiered Hospital Networks†

Healthcare Demand under Simple Prices: Evidence from Tiered Hospital Networks† AbstractThis paper shows that consumers respond to prices for complex healthcare when they can easily assess out-of-pocket prices. Healthcare cost containment efforts increasingly incentivize price shopping despite a dearth of evidence that this steers consumers toward lower-priced care for major medical services. I show that consumers shift toward lower-priced hospitals in the highly simplified price information environment of insurance plans with tiered hospital networks. Consumers observe a single predictable, well-defined price that applies to a broad range of services within each of at most three hospital tiers. Within three years, expected partial-equilibrium savings reach 8–17 percent of baseline spending. (JEL G22, H75, I11, I13) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal Applied Economics American Economic Association

Healthcare Demand under Simple Prices: Evidence from Tiered Hospital Networks†

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Publisher
American Economic Association
Copyright
Copyright © 2020 © American Economic Association
ISSN
1945-7790
DOI
10.1257/app.20180422
Publisher site
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Abstract

AbstractThis paper shows that consumers respond to prices for complex healthcare when they can easily assess out-of-pocket prices. Healthcare cost containment efforts increasingly incentivize price shopping despite a dearth of evidence that this steers consumers toward lower-priced care for major medical services. I show that consumers shift toward lower-priced hospitals in the highly simplified price information environment of insurance plans with tiered hospital networks. Consumers observe a single predictable, well-defined price that applies to a broad range of services within each of at most three hospital tiers. Within three years, expected partial-equilibrium savings reach 8–17 percent of baseline spending. (JEL G22, H75, I11, I13)

Journal

American Economic Journal Applied Economics – American Economic Association

Published: Oct 1, 2020

References