Cost-Sharing and the Patient's Choice of Provider

Consumer cost-sharing in health insurance is advocated by some as a means of containing rising health care costs. There is strong evidence that cost-sharing reduces the quantity of medical care demanded. Cost-sharing, it is argued, also may encourage consumers to search for lower-priced providers of care which, in turn, would encourage price competition among physicians as they try to attract or retain patients. This report analyzes two measures of choice of provider: a categorical variable representing the specialty type of provider from which the patient sought care, and a variable measuring the relative costliness or prices of the chosen provider. The author concludes that the preliminary results provide scant reason to believe that cost-sharing will lead consumers to search for lower-cost providers of care and thereby enhance the competitiveness of the medical market.