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Does It Pay to Know Prices in Health Care?

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  • Ethan M. J. Lieber

Abstract

Consumers rarely know the price of medical care before they consume it. I use variation in the timing of access to a new source of price information to show how access to and search for price information leads consumers to pay significantly less for care. I provide suggestive evidence that insurance coverage inhibits the use of price information, rationalizing the relatively low rates of search. The results indicate that availability of price information could have large impacts on prices even in the absence of general equilibrium effects.

Suggested Citation

  • Ethan M. J. Lieber, 2017. "Does It Pay to Know Prices in Health Care?," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 154-179, February.
    • Handle: RePEc:aea:aejpol:v:9:y:2017:i:1:p:154-79
    Note: DOI: 10.1257/pol.20150124
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    4. Zarek C. Brot-Goldberg & Amitabh Chandra & Benjamin R. Handel & Jonathan T. Kolstad, 2017. "What does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 132(3), pages 1261-1318.
    5. Chernew, Michael & Cooper, Zack & Hallock, Eugene Larsen & Scott Morton, Fiona, 2021. "Physician agency, consumerism, and the consumption of lower-limb MRI scans," Journal of Health Economics, Elsevier, vol. 76(C).
    6. Sunday Stephen AJEMUNIGBOHUN & Sulaiman Ademola Oreshile, 2019. "Risk Aversion And Motor Insurance Demand: Empirical Evidence From Nigeria," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 2(47), pages 211-222, December.
    7. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    8. Keith Marzilli Ericson & Philipp Kircher & Johannes Spinnewijn & Amanda Starc, 2021. "Inferring Risk Perceptions and Preferences Using Choice from Insurance Menus: Theory and Evidence," The Economic Journal, Royal Economic Society, vol. 131(634), pages 713-744.
    9. Sebastian Linde & Ralph Siebert, 2021. "Exploring the Heterogeneous Effects of State Price Transparency Laws on Charge Prices, Negotiated Prices, and Operating Costs," CESifo Working Paper Series 9348, CESifo.
    10. Klein, Tobias & Husiatyński, Maciej & Mikkers, Misja, 2021. "Increasing price transparency in the Dutch health care market does not affect provider choice," CEPR Discussion Papers 15981, C.E.P.R. Discussion Papers.
    11. Christopher Whaley & Timothy Brown & James Robinson, 2019. "Consumer Responses to Price Transparency Alone versus Price Transparency Combined with Reference Pricing," American Journal of Health Economics, MIT Press, vol. 5(2), pages 227-249, Spring.
    12. Matthew Grennan & Ashley Swanson, 2020. "Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1234-1268.
    13. Haizhen Lin & Daniel W. Sacks, 2016. "Intertemporal Substitution in Health Care Demand: Evidence from the RAND Health Insurance Experiment," NBER Working Papers 22802, National Bureau of Economic Research, Inc.
    14. Zach Y. Brown, 2019. "Equilibrium Effects of Health Care Price Information," The Review of Economics and Statistics, MIT Press, vol. 101(4), pages 699-712, October.
    15. Lawrence C. Pellegrini & Kimberley H. Geissler, 2019. "Supplemental Security Income enrollment and health care and social assistance employment and wages," International Journal of Health Planning and Management, Wiley Blackwell, vol. 34(4), pages 1319-1332, October.
    16. Zhang, Angela & Prang, Khic-Houy & Devlin, Nancy & Scott, Anthony & Kelaher, Margaret, 2020. "The impact of price transparency on consumers and providers: A scoping review," Health Policy, Elsevier, vol. 124(8), pages 819-825.
    17. Hans B. Christensen & Eric Floyd & Mark Maffett, 2020. "The Only Prescription Is Transparency: The Effect of Charge-Price-Transparency Regulation on Healthcare Prices," Management Science, INFORMS, vol. 66(7), pages 2861-2882, July.
    18. Husiatyński, Maciej, 2021. "Three essays on individual behavior and new technologies," Other publications TiSEM 1a7d7036-3d54-4a7b-a425-e, Tilburg University, School of Economics and Management.
    19. Lin, Haizhen & Sacks, Daniel W., 2019. "Intertemporal substitution in health care demand: Evidence from the RAND Health Insurance Experiment," Journal of Public Economics, Elsevier, vol. 175(C), pages 29-43.
    20. Stephenson Strobel, 2023. "Waiting for Dr. Godot: how much and who responds to predicted health care wait times?," Papers 2309.13219, arXiv.org.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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