Do report cards tell consumers anything they don't already know? The case of Medicare HMOs

Abstract

Estimated responses to report cards may reflect learning about quality that would have occurred in their absence ("market-based learning"). Using panel data on Medicare HMOs, we examine the relationship between enrollment and quality before and after report cards were mailed to 40 million Medicare beneficiaries in 1999 and 2000. We find consumers learn from both public report cards and market-based sources, with the latter having a larger impact. Consumers are especially sensitive to both sources of information when the variance in HMO quality is greater. The effect of report cards is driven by beneficiaries' responses to consumer satisfaction scores.