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Medical bill shock and imperfect moral hazard

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  • Anderson, David M.
  • Hoagland, Alex
  • Zhu, Ed

Abstract

Consumers are sensitive to medical prices when consuming care, but delays in price information may distort moral hazard. We study how medical bills affect household spillover spending following utilization of shoppable services, leveraging variation in insurer claim processing times. Households increase spending by 22% after a scheduled service, but then reduce spending by 11% after the bill arrives. Observed bill effects are consistent with resolving price uncertainty; bill effects are strongest when pricing information is particularly salient. A model of demand for healthcare with delayed pricing information suggests households misperceive pricing signals prior to bills, and that correcting these perceptions reduce average (median) spending by 16% (7%) annually.

Suggested Citation

  • Anderson, David M. & Hoagland, Alex & Zhu, Ed, 2024. "Medical bill shock and imperfect moral hazard," Journal of Public Economics, Elsevier, vol. 236(C).
    • Handle: RePEc:eee:pubeco:v:236:y:2024:i:c:s0047272724000884
    DOI: 10.1016/j.jpubeco.2024.105152
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    More about this item

    Keywords

    Ex-post moral hazard; Price transparency; Learning; Low-value care;
    All these keywords.

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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