Jonathan T. Kolstad

Quality and Consumer Decision Making in the Market for Health Insurance and Health Care Services

This article reviews the literature relating quality to consumer choice of health plan or health care provider. Evidence suggests that consumers tend to choose better performing health plans and providers and are responsive to initiatives that provide quality information. The response to quality and quality information differs significantly among consumers and across population subgroups. As such the effect of quality information on choice is apparent in only a relatively small, though perhaps consequential, number of consumers. Despite the wealth of findings on the topic to date, the authors suggest directions for future work, including better assessment of the dynamic issues related to information release, as well as a better understanding of how the response to information varies across different groups of patients.

Consumers' misunderstanding of health insurance

We report results from two surveys of representative samples of Americans with private health insurance. The first examines how well Americans understand, and believe they understand, traditional health insurance coverage. The second examines whether those insured under a simplified all-copay insurance plan will be more likely to engage in cost-reducing behaviors relative to those insured under a traditional plan with deductibles and coinsurance, and measures consumer preferences between the two plans. The surveys provide strong evidence that consumers do not understand traditional plans and would better understand a simplified plan, but weaker evidence that a simplified plan would have strong appeal to consumers or change their healthcare choices.

A behavioral blueprint for improving health care policy

Behavioral policy to improve health and health care often relies on interventions, such as nudges, which target individual behaviors. But the most promising applications of behavioral insights in this area involve more far-reaching and systemic interventions. In this article, we propose a series of policies inspired by behavioral research that we believe offer the greatest potential for success. These include interventions to improve health-related behaviors, health insurance access, decisions about insurance plans, end-of-life care, and rates of medical (for example, organ and blood) donation. We conclude with a discussion of new technologies, such as electronic medical records and web- or mobile-based decision apps, which can enhance doctor and patient adherence to best medical practices. These technologies, however, also pose new challenges that can undermine the effectiveness of medical care delivery.

The Effect of Public and Private Quality Information on Consumer Choice in Health Care Markets

Information-based policy interventions have become increasingly common in health care markets. The rationale for such interventions is to correct a market failure in which consumers are asymmetrically informed about relevant attributes of a health care provider (e.g., quality). The magnitude of this market failure and the effect of public intervention on welfare depend on whether there exists market-based information on quality that alters consumer choice. To better understand such effects, I study consumer response to information provided by U.S. News and World Report hospital rankings and hospital reputation before and after the release of report cards on surgeon quality in Pennsylvania’s market for cardiac bypass surgery. I estimate a model of consumer demand for surgeon quality (mortality) that integrates market-based information and quality reporting while controlling for the role of insurers and referring physicians in consumers’ choice. The role of public versus market-based learning is identified using the interaction of the intertemporal change in information induced by the release of report cards with differences across providers in market-based information on those providers’ quality. I find that market-based mechanisms impact patient response to quality prior to the release of report cards. After public release of information, the response to surgeon quality increases significantly. However, existing U.S. News and World Report rankings reduce consumer response to surgeon quality.