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Learning and the value of information: the case of health plan report cards

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  • Michael Chernew
  • Gautam Gowrisankaran
  • Dennis P. Scanlon

Abstract

We estimate a Bayesian learning model in order to assess the value of health plan performance information and the extent to which the explicit provision of information about product quality alters consumer behavior. We take advantage of a natural experiment in which health plan performance information for HMOs was released to employees of a Fortune 50 company for the first time. Our empirical work indicates that the release of information had a small but statistically significant effect on health plan choices, causing 3.1% of employees to switch health plans. Although consumers were willing to pay an extra $267 per year per below average rating avoided, the average value of the information per employee was only $10 per year. The relatively small impact of the ratings arises because the ratings were estimated to be very imprecise measures of quality. More precise measures of quality could have been more valuable.

Suggested Citation

  • Michael Chernew & Gautam Gowrisankaran & Dennis P. Scanlon, 2002. "Learning and the value of information: the case of health plan report cards," Working Paper Series 2002-17, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:2002-17
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    Cited by:

    1. Rita Ginja & Julie Riise & Barton Willage & Alexander L.P. Willén, 2022. "Does Your Doctor Matter? Doctor Quality and Patient Outcomes," CESifo Working Paper Series 9788, CESifo.
    2. Bunnings, C,; & Schmitz, H,; & Tauchmann, H,; & Ziebarth, N.R,;, 2015. "How Health Plan Enrollees Value Prices Relative to Supplemental Benefits and Service Quality," Health, Econometrics and Data Group (HEDG) Working Papers 15/02, HEDG, c/o Department of Economics, University of York.
    3. Buchmueller, Thomas, 2006. "Price and the health plan choices of retirees," Journal of Health Economics, Elsevier, vol. 25(1), pages 81-101, January.
    4. Greß, Stefan & Tamm, Marcus & Tauchmann, Harald & Wasem, Jürgen, 2005. "Price Elasticities and Social Health Insurance Choice in Germany: A Dynamic Panel Data Approach," RWI Discussion Papers 28, RWI - Leibniz-Institut für Wirtschaftsforschung.
    5. Jong‐Yi Wang & Janice C. Probst & Carleen H. Stoskopf & Jimy M. Sanders & James F. McTigue, 2011. "Information asymmetry and performance tilting in hospitals: a national empirical study," Health Economics, John Wiley & Sons, Ltd., vol. 20(12), pages 1487-1506, December.
    6. Lei, Xiaoyan & Song, Guangxiang & Su, Xuejuan, 2021. "Information, Belief, and Health Behavior: Evidence from China," Working Papers 2021-9, University of Alberta, Department of Economics.
    7. repec:mpr:mprres:3849 is not listed on IDEAS
    8. Town, Robert & Liu, Su, 2003. "The Welfare Impact of Medicare HMOs," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 719-736, Winter.

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