Learning and the Value of Information: The Case of Health Plan Report Cards

FRB of San Francisco Working Paper No. 2002-17

46 Pages Posted: 3 May 2005

See all articles by Michael Chernew

Michael Chernew

Harvard University - Department of Health Care Policy; National Bureau of Economic Research (NBER)

Gautam Gowrisankaran

Columbia University; HEC Montreal; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Dennis P. Scanlon

Pennsylvania State University - Department of Health Policy and Administration

Date Written: June 2002

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.

Keywords: Medical care

Suggested Citation

Chernew, Michael E. and Gowrisankaran, Gautam and Scanlon, Dennis P., Learning and the Value of Information: The Case of Health Plan Report Cards (June 2002). FRB of San Francisco Working Paper No. 2002-17, Available at SSRN: https://ssrn.com/abstract=709381 or http://dx.doi.org/10.2139/ssrn.709381

Michael E. Chernew (Contact Author)

Harvard University - Department of Health Care Policy ( email )

25 Shattuck Street
Boston, MA 02115
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gautam Gowrisankaran

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dennis P. Scanlon

Pennsylvania State University - Department of Health Policy and Administration ( email )

University Park
State College, PA 16802
United States
814-865-1925 (Phone)
814-863-2905 (Fax)

HOME PAGE: http://www.personal.psu.edu/dxs62/

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