Duke 2008 | ASHE | Equity and Efficiency in Health and Healthcare

Public disclosure of quality information is a major movement in the current health care system, and has been rapidly expanding to varied health care settings. Despite wide attention to information disclosure, there is little discussion of whether disclosure should be mandatory or voluntary. This study examines incentives for voluntary disclosure of quality information by Health Maintenance Organizations (HMOs). Economic theory predicts complete voluntary disclosure without mandatory rules ('market unraveling'). I challenge this conventional wisdom and examine plans' selection motives to avoid high-risk consumers as a deterrent to full voluntary disclosure. If disclosure is expected to attract high-risk members, health plans may have incentives to withhold information.

The study uses a unique data set available from a voluntary disclosure program. All the HMOs in the data set collected quality information at a cost; however, after collecting the data, some plans declined to disclose the information to the public. The availability of information about plans that collected but did not disclose the data is a novel research opportunity to directly test the unraveling effect and to investigate disclosure incentives while controlling for data collection costs. To examine different disclosure incentives depending on different levels of plan quality, the model is also estimated separately by quality quartiles.

Using data from 1997 to 2000, I find that market mechanisms played an important role in bringing voluntary disclosure to HMO markets; high quality plans tended voluntarily to release quality information. However, disclosure (or 'unraveling') was not complete. There was some variation in quality both within the disclosing and non-disclosing groups; not all the high quality plans disclosed and not all the low quality plans remained silent.

The empirical analysis shows that plans in markets with high-risk consumers, measured by the death rate from cardiovascular diseases or diabetes, were less likely to voluntarily disclose. I also find that market competitive forces contributed to disclosure under certain circumstances. The findings of this study suggest that full unraveling is not likely to occur in markets where selection behavior by health plans is prevalent. In developing policies to encourage disclosure of quality information, market environments such as competition and consumers' health risk should be considered.