Hospital Network Competition and Adverse Selection: Evidence From the Massachusetts health Insurance Exchange
Mark Shepard looks at date in the Boston health care market to show how insurers are restricting their networks.
Shepard writes, "these plans attract consumers loyal to the star hospitals and who tend to use their high-price care when sick. Using a structural model, I show that selection creates a strong incentive to exclude star hospitals but that standard policy solutions do not improve net welfare. A key reason is the connection between selection and moral hazard in star hospital use."