Working Paper: NBER ID: w19333
Authors: Kate Ho; Ariel Pakes
Abstract: We estimate an insurer-specific preference function which rationalizes hospital referrals for privately-insured births in California. The function is additively separable in: a hospital price paid by the insurer, the distance traveled, and plan and severity-specific hospital fixed effects (capturing hospital quality). We use an inequality estimator that allows for errors in price and detailed hospital-severity interactions and obtain markedly different results than those from a logit. The estimates indicate that insurers with more capitated physicians are more responsive to price. Capitated plans send patients further to utilize similar-quality lower-priced hospitals; but the cost-quality trade-off does not vary with capitation rates.
Keywords: hospital choices; hospital prices; financial incentives; physicians; healthcare costs
JEL Codes: I11; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher proportion of capitated payments (I13) | lower-cost hospitals (I11) |
| capitated plans send patients further (I11) | similar-quality, lower-priced hospitals (I11) |
| higher capitation rates (I18) | greater price sensitivity (D49) |
| price paid by insurers (G52) | referrals (L84) |