Tuesday, November 29, 2016

Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange

Mark Shepard analyzes Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange.

ABSTRACT:  Health insurers increasingly compete on their covered networks of medical providers. Using data from Massachusetts’ pioneer insurance exchange, I find substantial adverse selection against plans covering the most prestigious and expensive “star” hospitals. I highlight a theoretically distinct selection channel: these plans attract consumers loyal to the star hospitals and who tend to use their high-price care when sick. Using a structural model, I show that selection creates a strong incentive to exclude star hospitals but that standard policy solutions do not improve net welfare. A key reason is the connection between selection and moral hazard in star hospital use.

https://lawprofessors.typepad.com/antitrustprof_blog/2016/11/hospital-network-competition-and-adverse-selection-evidence-from-the-massachusetts-health-insurance-.html

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