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Tradeoffs in the design of health plan payment systems: Fit, power and balance.
- Source :
-
Journal of Health Economics . May2016, Vol. 47, p1-19. 19p. - Publication Year :
- 2016
-
Abstract
- In many markets, including the new U.S. Marketplaces, health insurance plans are paid by risk-adjusted capitation, sometimes combined with reinsurance and other payment mechanisms. This paper proposes a framework for evaluating the de facto insurer incentives embedded in these complex payment systems. We discuss fit, power and balance, each of which addresses a distinct market failure in health insurance. We implement empirical metrics of fit, power, and balance in a study of Marketplace payment systems. Using data similar to that used to develop the Marketplace risk adjustment scheme, we quantify tradeoffs among the three classes of incentives. We show that an essential tradeoff arises between the goals of limiting costs and limiting cream skimming because risk adjustment, which is aimed at discouraging cream-skimming, weakens cost control incentives in practice. A simple reinsurance system scores better on our measures of fit, power and balance than the risk adjustment scheme in use in the Marketplaces. [ABSTRACT FROM AUTHOR]
- Subjects :
- *HEALTH insurance exchanges
*HEALTH risk assessment
*PAYMENT systems
*HEALTH planning finance
*CONJOINT analysis
*COMPARATIVE studies
*DISCRIMINATION in insurance
*HEALTH insurance
*RESEARCH methodology
*MEDICAL cooperation
*RESEARCH
*RESEARCH funding
*RISK assessment
*CAPITATION fees (Medical care)
*HEALTH insurance reimbursement
*EVALUATION research
Subjects
Details
- Language :
- English
- ISSN :
- 01676296
- Volume :
- 47
- Database :
- Academic Search Index
- Journal :
- Journal of Health Economics
- Publication Type :
- Academic Journal
- Accession number :
- 114629245
- Full Text :
- https://doi.org/10.1016/j.jhealeco.2016.01.007