Risk adjustment and the trade-off between efficiency and risk selection: an application of the theory of fair compensation

1998 ◽  
Vol 7 (5) ◽  
pp. 465-480 ◽  
Author(s):  
Erik Schokkaert ◽  
Geert Dhaene ◽  
Carine Van De Voorde
Keyword(s):  
Risk Adjustment ◽  
Risk Selection ◽  
Trade Off ◽  
Fair Compensation

Contending with Risk Selection in Health Insurance Markets in Germany

2006 ◽  
Vol 7 (Supplement) ◽  
pp. 75-91 ◽  
Author(s):  
Jacob Glazer ◽  
Thomas G. McGuire
Keyword(s):  
Health Insurance ◽  
Risk Adjustment ◽  
Simple Approach ◽  
Insurance Markets ◽  
Risk Selection ◽  
Health Plans ◽  
Health Insurance Markets ◽  
The U.S

Abstract In many countries, competition among health plans or sickness funds raises issues of risk selection. Funds may discourage or encourage potential enrollees from joining, and these actions may have efficiency or fairness implications. This article reviews the experience in the U.S., and comments on the evidence for risk selection in Germany. There is little evidence that risk selection causes efficiency problems in Germany, but risk selection does lead to an inequality in contribution rates. A simple approach to equalizing contribution rates that does not involve risk adjustment is presented and discussed.

scholarly journals Preserving social equity in marketized primary care: strategies in Sweden

2020 ◽  
pp. 1-16
Author(s):  
Ulrika Winblad ◽  
David Isaksson ◽  
Paula Blomqvist
Keyword(s):  
Primary Care ◽  
Risk Adjustment ◽  
Local Governments ◽  
Social Inequalities ◽  
Economic Status ◽  
Health Care Systems ◽  
Patient Choice ◽  
Risk Selection ◽  
Right Wing ◽  
Left Wing

Abstract A primary care choice reform launched in Sweden in 2010 led to a rapid growth of private providers. Critics feared that the reform would lead to an increased tendency among new, profit-driven, providers, to select patients with lower health risks. Even if open risk selection is prohibited, providers can select patients in more subtle ways, such as establishing their practices in areas with higher health status. This paper investigates to what extent strategies were employed by local governments to avoid risk selection and whether there were any differences between left- and right-wing governments in this regard. Three main strategies were used: risk adjustment of the financial reimbursements on the basis of health and/or socio-economic status of listed patients; design of patient listing systems; and regulatory requirements regarding the scope and content of the services that had to be offered by all providers. Additionally, left-wing local governments were more prone than right-wing governments to adopt risk adjustment strategies at the onset of the reform but these differences diminished over time. The findings of the paper contribute to our understanding of how social inequalities may be avoided in tax-based health care systems when market-like steering models such as patient choice are introduced.

How profitable is risk selection? A comparison of four risk adjustment models

2002 ◽  
Vol 11 (2) ◽  
pp. 165-174 ◽  
Author(s):  
Yujing Shen ◽  
Randall P. Ellis
Keyword(s):  
Risk Adjustment ◽  
Risk Selection

scholarly journals Risk adjustment and risk selection on the sickness fund insurance market in five European countries

Health Policy ◽  
2003 ◽  
Vol 65 (1) ◽  
pp. 75-98 ◽  
Author(s):  
Wynand P.M.M van de Ven ◽  
Konstantin Beck ◽  
Florian Buchner ◽  
Dov Chernichovsky ◽  
Lucien Gardiol ◽  
...  
Keyword(s):  
Risk Adjustment ◽  
Sickness Fund ◽  
European Countries ◽  
Insurance Market ◽  
Risk Selection

scholarly journals Favorable Risk Selection in Medicare Advantage: Trends in Mortality and Plan Exits Among Nursing Home Beneficiaries

2016 ◽  
Vol 74 (6) ◽  
pp. 736-749 ◽  
Author(s):  
Elizabeth M. Goldberg ◽  
Amal N. Trivedi ◽  
Vincent Mor ◽  
Hye-Young Jung ◽  
Momotazur Rahman
Keyword(s):  
Nursing Home ◽  
Risk Adjustment ◽  
Risk Selection ◽  
Medicare Advantage ◽  
Medicare Beneficiaries ◽  
Payment Model ◽  
Mortality Difference ◽  
Switch Rate ◽  
Reduced Risk

The 2003 Medicare Modernization Act (MMA) increased payments to Medicare Advantage plans and instituted a new risk-adjustment payment model to reduce plans’ incentives to enroll healthier Medicare beneficiaries and avoid those with higher costs. Whether the MMA reduced risk selection remains debatable. This study uses mortality differences, nursing home utilization, and switch rates to assess whether the MMA successfully decreased risk selection from 2000 to 2012. We found no decrease in the mortality difference or adjusted difference in nursing home use between plan beneficiaries pre- and post the MMA. Among beneficiaries with nursing home use, disenrollment from Medicare Advantage plans declined from 20% to 12%, but it remained 6 times higher than the switch rate from traditional Medicare to Medicare Advantage. These findings suggest that the MMA was not associated with reductions in favorable risk selection, as measured by mortality, nursing home use, and switch rates.

Risk adjustment and risk selection in Europe: 6 years later

Health Policy ◽  
2007 ◽  
Vol 83 (2-3) ◽  
pp. 162-179 ◽  
Author(s):  
Wynand P.M.M. van de Ven ◽  
Konstantin Beck ◽  
Carine Van de Voorde ◽  
Jürgen Wasem ◽  
Irit Zmora
Keyword(s):  
Risk Adjustment ◽  
Risk Selection

scholarly journals Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges

2019 ◽  
Vol 11 (2) ◽  
pp. 64-107 ◽  
Author(s):  
Michael Geruso ◽  
Timothy Layton ◽  
Daniel Prinz
Keyword(s):  
Health Insurance ◽  
Prescription Drugs ◽  
Risk Adjustment ◽  
Contract Design ◽  
Trade Off ◽  
Insurance Contracts ◽  
Exchange Risk ◽  
Multidimensional Screening ◽  
Risk Protection ◽  
Insurance Exchanges

We study insurers’ use of prescription drug formularies to screen consumers in the ACA Health Insurance exchanges. We begin by showing that exchange risk adjustment and reinsurance succeed in neutralizing selection incentives for most, but not all, consumer types. A minority of consumers, identifiable by demand for particular classes of prescription drugs, are predictably unprofitable. We then show that contract features relating to these drugs are distorted in a manner consistent with multidimensional screening. The empirical findings support a long theoretical literature examining how insurance contracts offered in equilibrium can fail to optimally trade off risk protection and moral hazard. (JEL D82, G22, H51, I13, I18)

scholarly journals How Does Risk Selection Respond to Risk Adjustment? New Evidence from the Medicare Advantage Program

2014 ◽  
Vol 104 (10) ◽  
pp. 3335-3364 ◽  
Author(s):  
Jason Brown ◽  
Mark Duggan ◽  
Ilyana Kuziemko ◽  
William Woolston
Keyword(s):  
Adverse Selection ◽  
Risk Adjustment ◽  
Medical Costs ◽  
Risk Selection ◽  
Health Plans ◽  
Medicare Advantage ◽  
Capitation Payments ◽  
New Evidence

To combat adverse selection, governments increasingly base payments to health plans and providers on enrollees' scores from risk-adjustment formulae. In 2004, Medicare began to risk-adjust capitation payments to private Medicare Advantage (MA) plans to reduce selection-driven overpayments. But because the variance of medical costs increases with the predicted mean, incentivizing enrollment of individuals with higher scores can increase the scope for enrolling “overpriced” individuals with costs significantly below the formula's prediction. Indeed, after risk adjustment, MA plans enrolled individuals with higher scores but lower costs conditional on their score. We find no evidence that overpayments were on net reduced. (JEL G22, H51, I13, I18)

Theorie und Praxis des Risikostrukturausgleichs / Risk Adjustment in Theory and Practice

2007 ◽  
Vol 227 (5-6) ◽  
Author(s):  
Dirk Göpffarth
Keyword(s):  
Risk Adjustment ◽  
Theory And Practice ◽  
Empirical Literature ◽  
Risk Selection ◽  
Special Focus ◽  
Adjustment Procedure ◽  
Negative Effect ◽  
Informative Signals ◽  
Theorie Und Praxis ◽  
Adjustment Scheme

SummaryThis article reviews the basic theoretical model of risk adjustment (Glazer/McGuire 2000) with a special focus on a coherent presentation of the main results. With adverse selection a regulator pursuing efficiency and solidarity objectives will need a risk adjustment scheme acting on a signal to accomplish both aims. With an imperfect signal this result will not hold. The regulator can react by trying to find more informative signals or by changing the calculation of the risk adjustment scheme (optimal risk adjustment). The model is then extended to derive results on the associated incentives regarding economic efficiency, manipulation of signals and innovation. The incentives will hold with perfect signals but may be violated in the imperfect signal setting. Optimal risk adjustment will most likely have a negative effect on these incentives. The results are contrasted with the empirical literature on the risk adjustment procedure in Germany which is centred on risk selection, the choice of risk adjustors and incentive effects. The paper concludes with an outlook on the ongoing reform of the German risk adjustment procedure.

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