Information, switching costs, and consumer choice: Evidence from two randomized field experiments in Swedish primary health care

Wednesday, June 26, 2019: 8:30 AM
Wilson A - Mezzanine Level (Marriott Wardman Park Hotel)

Presenter: Gustav Kjellsson

Co-Authors: Anders Anell; Jens Dietrichson; Lina Maria Ellegård

Discussant: Sebastian Fleitas

Consumers of services that are financed by a third party, such as publicly financed education and health care or firm-sponsored health plans, are often allowed to choose from a menu of providers. The rationale for consumer choice is simple: given that consumers have superior knowledge of their preferences and needs, choice should improve the matching of consumers and providers, and strengthen the providers’ incentives to improve quality. However, the available empirical evidence does not suggest that consumer choice systems in general have led to substantial quality improvements. From a scientific as well as from a policy perspective, it is of considerable interest to understand why consumer choice sometimes fails to improve on the quality of services, and to find ways to improve choice systems. Using data from two randomized field experiments, this paper provides the first experimental evidence that information frictions and switching costs prevail in the market for primary care, and indicates how these frictions can be reduced.

Our experimental setting is a Swedish region with 1.3 million residents, where consumer choice between in total about 150 providers has been an integral feature of primary care since 2009. Our first experimental intervention was directed to a sample representative of the general population. The second intervention targeted new residents. The treatment groups, 10,259 individuals in the population-representative sample and 3,454 in the sample of new residents, received a leaflet designed in collaboration with the regional health care authority by postal mail (102,600 and 3,456 in the respective controls received nothing). The leaflet contained comparative information on, e.g., accessibility, quality, and available services of an individual’s current primary care provider and its three geographically closest competitors. 7,700 of the treated in the population-representative sample, and all treated new residents, received a pre-paid choice form together with the leaflet. The interventions are analyzed using data from several registers.

In the population-representative sample, switching rates were about 14 and 10 percent higher in the treatment groups with and without a pre-paid choice form than in the control group. Among new residents, the switching rate was 26 percent higher in the treatment group compared to controls. For the treatment groups that received the leaflet together with a choice form, the treatment effect is statistically significant in all specifications for both populations. For the smaller treatment group that did not receive a choice form, the effect on the switching rate is slightly smaller, imprecisely measured, and statistically insignificant at conventional levels; however, the two treatments are not significantly different from each other.

The effects are substantially larger in urban markets, and in these markets, the effects are significant for all treatments. Overall, the results suggest that the information mattered. Individuals in all treatment groups were significantly more likely than controls to switch to centers they were provided information about. We also find that the treatment without a choice form significantly affected individuals’ choice in the direction of better rated centers, whereas the evidence is weaker in this regard for the treatment with a choice form.

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