Motivated Inferences of Price and Quality in Healthcare Decisions

Abstract

Policy makers have increasingly advocated for healthcare price transparency, whereby prices are made salient before services are rendered. While such policies may empower consumers, they also bring price to the forefront of healthcare choices as never before, with yet underexplored consequences on consumers’ decisions. This article explores one: using price as a signal of quality. Five experiments demonstrate how healthcare consumers may come to form price-based inferences of quality and explore how these inferences may vary as a function of individuals’ health insurance coverage. Specifically, relative to high-coverage consumers (for whom insurance covers a relatively greater portion of healthcare expenses), low-coverage consumers (for whom insurance covers relatively less) tend to both choose lower-priced providers and perceive a weaker price-quality relationship, suggestive of motivated reasoning. Our work exposes one way in which price transparency policies may have divergent effects on low- versus high-coverage consumers, with direct implications for policy.