Healthcare Demand under Simple Prices: Evidence from Tiered Hospital Networks†

Elena Prager*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)196-223
Number of pages28
JournalAmerican Economic Journal: Applied Economics
Volume12
Issue number4
DOIs
StatePublished - Oct 2020

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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