Abstract

http://ssrn.com/abstract=2343367
 


 



The Effects of Price Transparency Regulation on Prices in the Healthcare Industry


Hans Bonde Christensen


University of Chicago - Booth School of Business

Eric Floyd


University of Chicago - Booth School of Business

Mark G. Maffett


University of Chicago - Booth School of Business

March 11, 2014


Abstract:     
Policymakers have enacted price transparency regulations in over thirty states during the past decade as an attempt to control rising healthcare costs. This paper provides empirical evidence on the causal effects of these regulations. Using micro data on actual healthcare purchases, and exploiting both between- and within-state variation to address endogeneity concerns, we find that price transparency regulations reduce the price charged for common, uncomplicated, elective procedures by an average of approximately 7 percent. Further evidence indicates that the reduction in charge prices is concentrated where competition among providers is most intense and that this reduction is attributable to a decline in the prices charged by the highest priced providers. However, among insured patients, who constitute over 80 percent of U.S. consumers, we find that, despite the observed decline in charge prices, on average, price transparency regulation has no effect on actual payments. For the insured, payment reductions are observed only for the most price sensitive patients, as captured by the patients’ direct share of the total payment. Overall, our evidence indicates that while price transparency regulation leads to a reduction in healthcare charge prices, it decreases actual payments only for consumers who have incentives to consider costs.

Number of Pages in PDF File: 59

Keywords: Transparency regulation, Healthcare prices, Search costs

JEL Classification: A10, I11, K32, L15

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Date posted: October 22, 2013 ; Last revised: March 12, 2014

Suggested Citation

Christensen, Hans Bonde and Floyd, Eric and Maffett, Mark G., The Effects of Price Transparency Regulation on Prices in the Healthcare Industry (March 11, 2014). Available at SSRN: http://ssrn.com/abstract=2343367 or http://dx.doi.org/10.2139/ssrn.2343367

Contact Information

Hans Bonde Christensen
University of Chicago - Booth School of Business ( email )
5807 South Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

Eric Floyd
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

Mark G. Maffett (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

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