We provide empirical evidence on the causal effects of price transparency regulation (PTR) in the healthcare industry. Using micro data on actual healthcare purchases, and exploiting both between- and within-state variation to address endogeneity concerns, we find that PTR reduces the price charged for common, elective medical procedures by approximately 5% and increases the sensitivity of demand to a 1% change in charge prices by 0.5%. However, the effect of PTR on the actual prices paid by insured patients is limited to the relatively small fraction of patients that have the greatest incentives to directly consider the costs of care.
The principles of transparency and disclosure are visible everywhere from fast-food menus to financial regulation. But if lawmakers don't consider the behavior of both markets and consumers, better information may not translate to smarter shoppers.
Consumer Protection Takes More Than Transparency
