Does it Pay to Know the Prices in Health Care?

Consumers have rarely known the price of medical care before receiving it, but access to price information is becoming more common. For a group of consumers with access to price information, I use detailed data on search, health care use, and negotiated prices to show that search leads consumers to pay significantly lower prices. I provide suggestive evidence that insurance coverage inhibits the use of price information which could rationalize the relatively low rates of search. The results suggest that availability of price information could have large impacts on prices, but that these impacts are mitigated by insurance coverage. JEL codes: I13, I11, D83. ∗I would like to thank Bill Evans, Matthew Gentzkow, Jonathan Hall, William Hubbard, Steve Levitt, Lee Lockwood, Emily Oster, Chad Syverson, seminar participants at UCLA, University of Chicago, University of Houston, University of Notre Dame, Rice University, and University of Tennessee for many helpful comments and suggestions. I would also like to thank Scott Schoenvogel, Cliff Sentell, Eric Bricker, M.D., and the other members of Compass Professional Health Services for providing me access to and help with the data. Any errors are my own.