Healthcare Demand under Simple Prices: Evidence from Tiered Hospital Networks
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Abstract
This 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.Citation
Prager, Elena. 2020. "Healthcare Demand under Simple Prices: Evidence from Tiered Hospital Networks." American Economic Journal: Applied Economics, 12 (4): 196-223. DOI: 10.1257/app.20180422Additional Materials
JEL Classification
- G22 Insurance; Insurance Companies; Actuarial Studies
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- I11 Analysis of Health Care Markets
- I13 Health Insurance, Public and Private
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