The Welfare Effects of Restricted Hospital Choice in the US Medical Care Market

Kate Ho

No 11819, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Managed care health insurers in the US restrict their enrollees' choice of hospitals to within specific networks. This paper considers the implications of these restrictions. A three-step econometric model is used to predict consumer preferences over health plans conditional on the hospitals they offer. The results indicate that consumers place a positive and significant weight on their expected utility from the hospital network when choosing plans. A welfare analysis, assuming fixed prices, implies that restricting consumers' choice of hospitals leads to a loss to society of approximately $1 billion per year across the 43 US markets considered. This figure may be outweighed by the price reductions generated by the restriction.

JEL-codes: I0 I1 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-com and nep-hea
Note: EH
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Citations: View citations in EconPapers (7)

Published as Ho, Katherine. “The Welfare Effects of Restricted Hospital Choice in the US Medical Care Market.” Journal of Applied Econometrics 21, 7 (2006): 1039-1079.

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Journal Article: The welfare effects of restricted hospital choice in the US medical care market (2006)
Journal Article: The welfare effects of restricted hospital choice in the US medical care market (2006)
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