Showing papers by "David Dranove published in 2008"

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.

Does the Market Punish Aggressive Experts? Evidence from Caesarean Sections

Abstract: There are many markets in which a seller simultaneously diagnoses a customer's needs and recommends a product or service to meet them. Customers have limited information on which to judge the merits of the recommendation and may, as a result, agree to excessively costly or unnecessary services. This asymmetry of information poses a theoretical conundrum. What prevents sellers from always exaggerating the value of their products? A simple but compelling explanation is that consumers may choose not to purchase the product if the seller routinely exaggerates its value. In this paper, we examine whether the market does, in fact, punish overzealous sellers. We focus on the market for deliveries, a procedure in which a practicing obstetrician/gynecologist is faced with the choice of prescribing one of two possible modes: vaginal birth vs. a more highly reimbursed alternative, a cesarean section. We find that maternity patients prefer not to visit physicians with aggressive styles (i.e. physicians who overprescribe cesarean sections), ceteris paribus. The effect is most pronounced for high income patients and HMO patients, two segments of the market that might be very attractive to some obstetricians.

Code Red: An Economist Explains How to Revive the Healthcare System without Destroying It

Abstract: The U.S. healthcare system is in critical condition--but this should come as a surprise to no one. Yet until now the solutions proposed have been unworkable, pie-in-the-sky plans that have had little chance of becoming law and even less of succeeding. In Code Red, David Dranove, one of the nation's leading experts on the economics of healthcare, proposes a set of feasible solutions that address access, efficiency, and quality. Dranove offers pragmatic remedies, some of them controversial, all of them crucially needed to restore the system to vitality. He pays special attention to the plight of the uninsured, and proposes a new direction that promises to make premier healthcare for all Americans a national reality. Setting his story against the backdrop of healthcare in the United States from the early twentieth century to the present day, he reveals why a century of private and public sector efforts to reform the ailing system have largely failed. He draws on insights from economics to diagnose the root causes of rising costs and diminishing access to quality care, such as inadequate information, perverse incentives, and malfunctioning insurance markets. Dranove describes the ongoing efforts to revive the system--including the rise of consumerism, the quality movement, and initiatives to expand access--and argues that these efforts are doomed to fail without more fundamental, systemic, market-based reforms. Code Red lays the foundation for a thriving healthcare system and is indispensable for anyone trying to make sense of the thorny issues of healthcare reform.