Abstract
Abstract Politicians, think tanks, and advocacy groups have proposed paths to reduce prices and improve outcomes in the US healthcare market. These paths tend to follow a combination of formal neoclassical economic theory and lay theory which posits solutions focused on increasing competition, reducing regulations, and normative beliefs about price→quality and price→cost relationships. We identify these formal and informal theories and test five tenets of healthcare reform. Our results, based on over 7 million consumer/hospital interactions across the US, when combined with other empirical work, suggest that increased competition among hospitals is associated with lower hospital procedure prices; yet increased competition among insurers is associated with higher prices. Policymakers should not, in the current environment, rely on the tenet that reducing regulations will reduce hospital prices, nor should they assume that healthcare quality and price are positively correlated. We discuss the complexity of ...
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