Medical bill shock and imperfect moral hazard

David M. Anderson, Alex Hoagland and Ed Zhu

Journal of Public Economics, 2024, vol. 236, issue C

Abstract: Consumers are sensitive to medical prices when consuming care, but delays in price information may distort moral hazard. We study how medical bills affect household spillover spending following utilization of shoppable services, leveraging variation in insurer claim processing times. Households increase spending by 22% after a scheduled service, but then reduce spending by 11% after the bill arrives. Observed bill effects are consistent with resolving price uncertainty; bill effects are strongest when pricing information is particularly salient. A model of demand for healthcare with delayed pricing information suggests households misperceive pricing signals prior to bills, and that correcting these perceptions reduce average (median) spending by 16% (7%) annually.

Keywords: Ex-post moral hazard; Price transparency; Learning; Low-value care (search for similar items in EconPapers)
JEL-codes: D01 D90 I12 I13 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Medical Bill Shock and Imperfect Moral Hazard (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:236:y:2024:i:c:s0047272724000884

DOI: 10.1016/j.jpubeco.2024.105152

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