Research Details

Abstract

This paper shows that consumers price-shop for complex health care when they can easily assess out-of-pocket prices. Health care 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 price-shop in the highly simplified price information environment of health insurance plans with tiered hospital networks. These consumers observe a single predictable, well-defined price that applies to a broad range of services within each of at most three tiers of hospitals. The savings from price-shopping are large enough to both compensate for consumer welfare losses and raise insurer profits.

Type

Article

Author(s)

Elena Prager

Date Published

2020

Citations

Prager, Elena. 2020. Health Care Demand Under Simple Prices: Evidence From Tiered Hospital Networks. American Economic Journal: Applied Economics.(4): 196-223.