Healthcare Demand under Simple Prices: Evidence from Tiered Hospital Networks

Elena Prager

American Economic Journal: Applied Economics, 2020, vol. 12, issue 4, 196-223

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.

JEL-codes: G22 H75 I11 I13 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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DOI: 10.1257/app.20180422

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