Cost-sharing and provider choice

Restoring financial incentives to encourage patients to shop for the lowest prices for medical care underlies current procompetitive health financing proposals. This paper analyzes the impact of one such financial incentive--cost-sharing in health insurance--on patients' provider shopping behavior. Using data from the 'Health Insurance Study', the relationship of cost-sharing with the specialty type of the primary care provider and with the costliness of the selected provider is investigated. The results were mixed as to whether patients who have only catastrophic coverage seek lower priced physicians than patients who have free care; however, any differences were small. Even among the well-educated, who are likely to be more efficient than the less educated at obtaining comparative price information, the effects of cost-sharing on the costliness of the selected medical care provider were minimal.