IDEAS home Printed from https://ideas.repec.org/a/eee/jhecon/v56y2017icp201-221.html
   My bibliography  Save this article

The moral hazard effects of consumer responses to targeted cost-sharing

Author

Listed:
  • Whaley, Christopher M.
  • Guo, Chaoran
  • Brown, Timothy T.

Abstract

This paper examines the effects of the reference pricing program implemented by the California Public Employees Retirement System (CalPERS) in 2012. The program uses targeted cost-sharing to incentivize patient price shopping. We find that the program leads to a 10.3% increase in the use of low-price providers and reduces the average cost per procedure by 12.5%. We further estimate that the program reduces medical spending by $218.8 per procedure, which we estimate is approximately 53.7% of the excessive spending that is due to patient choice of higher price providers caused by insurance coverage, at the expense of a $94.3 (or 12.5%) reduction in consumer surplus. The cost savings from the reference pricing program is about two to three times as large as the reduction from implementing a high-deductible health plan, while the accompanying consumer surplus reduction is much smaller under reference pricing.

Suggested Citation

  • Whaley, Christopher M. & Guo, Chaoran & Brown, Timothy T., 2017. "The moral hazard effects of consumer responses to targeted cost-sharing," Journal of Health Economics, Elsevier, vol. 56(C), pages 201-221.
    • Handle: RePEc:eee:jhecon:v:56:y:2017:i:c:p:201-221
    DOI: 10.1016/j.jhealeco.2017.09.012
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167629616302934
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jhealeco.2017.09.012?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Annika Herr & Torben Stühmeier & Tobias Wenzel, 2023. "More cost‐sharing, less cost? Evidence on reference price drugs," Health Economics, John Wiley & Sons, Ltd., vol. 32(2), pages 413-435, February.
    2. Ackley, Calvin A., 2022. "Tiered cost sharing and health care demand," Journal of Health Economics, Elsevier, vol. 85(C).
    3. Xun Liu & Sen Lin & Lixing Liu & Fei Qian & Kun Zhang, 2020. "Exploring the Factors Triggering Occupational Ethics Risk of Technology Transaction in Chinese Construction Industry," IJERPH, MDPI, vol. 17(4), pages 1-18, February.
    4. Benjamin Handel & Nianyi Hong & Lynn M. Hua & Yuki Ito, 2023. "Employer risk‐adjustment transitions with inertial consumers: Evidence from CalPERS," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 90(1), pages 93-121, March.
    5. Whaley, Christopher M. & Brown, Timothy T., 2018. "Firm responses to targeted consumer incentives: Evidence from reference pricing for surgical services," Journal of Health Economics, Elsevier, vol. 61(C), pages 111-133.
    6. 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.
    7. Aouad, Marion & Brown, Timothy T. & Whaley, Christopher M., 2019. "Reference pricing: The case of screening colonoscopies," Journal of Health Economics, Elsevier, vol. 65(C), pages 246-259.
    8. Timothy Tyler Brown & Juan Pablo Atal, 2019. "How robust are reference pricing studies on outpatient medical procedures? Three different preprocessing techniques applied to difference‐in differences," Health Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 280-298, February.
    9. Marion Aouad & Timothy T. Brown & Christopher M. Whaley, 2021. "Understanding the distributional impacts of health insurance reform: Evidence from a consumer cost‐sharing program," Health Economics, John Wiley & Sons, Ltd., vol. 30(11), pages 2780-2793, November.

    More about this item

    Keywords

    Reference pricing; Moral hazard; Insurance benefit design;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jhecon:v:56:y:2017:i:c:p:201-221. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505560 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.