Your search

We estimate an insurer-specific preference function which rationalizeshospital referrals for privately insured births in California. The functionis additively separable in: a hospital price paid by the insurer,the distance traveled, and plan- and severity-specific hospital fixedeffects (capturing hospital quality). We use an inequality estimatorthat allows for errors in price and detailed hospital-severity interactions and obtain markedly different results than those from a logit. The estimates indicate that insurers with more capitated physicians are more responsive to price. Capitated plans send patients further to utilize similar quality, lower-priced hospitals; but the cost-quality trade-off does not vary with capitation rates. (JEL G22, H51, I11, I13, I18, J44)