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Firm responses to targeted consumer incentives: Evidence from reference pricing for surgical services.
Journal of Health Economics 2018 September
This paper examines how health care providers respond to a reference pricing insurance program that increases consumer cost sharing when consumers choose high-priced surgical providers. We use geographic variation in the population covered by the program to estimate supply-side responses. We find limited evidence of market segmentation and price reductions for providers with baseline prices above the reference price. Finally, approximately 75% of the reduction in provider prices is in the form of a positive externality that benefits a population not subject to the program.
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