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The welfare effects of restricted hospital choice in the US medical care market

✍ Scribed by Katherine Ho

Publisher
John Wiley and Sons
Year
2006
Tongue
English
Weight
318 KB
Volume
21
Category
Article
ISSN
0883-7252

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✦ Synopsis

Abstract

Managed care health insurers in the USA restrict their enrollees' choice of hospitals to within specific networks. This paper considers the implications of these restrictions. A three‐step econometric model is used to predict consumer preferences over health plans conditional on the hospitals they offer. The results indicate that consumers place a positive and significant weight on their expected utility from the hospital network when choosing plans. A welfare analysis, assuming fixed prices, implies that restricting consumers' choice of hospitals leads to a loss to society of approximately $1 billion per year across the 43 US markets considered. This figure may be outweighed by the price reductions generated by the restriction. Copyright Β© 2006 John Wiley & Sons, Ltd.

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