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Incentives for risk selection and omitted variables in the risk adjustment formula

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  • Erik Schokkaert
  • Carine Van De Voorde

Abstract

Risk adjustment in health insurance raises the question of how to treat variables which influence health care expenditures but do not capture acceptable costs differences. We argue that these variables should be included in the explanatory model and neutralized afterwards for the computation of the premium subsidies. This explicit approach is better than the conventional approach in removing the incentives for cream-skimming. We illustrate the empirical relevancy of the problem with data for Belgium.

Suggested Citation

  • Erik Schokkaert & Carine Van De Voorde, 2006. "Incentives for risk selection and omitted variables in the risk adjustment formula," Annals of Economics and Statistics, GENES, issue 83-84, pages 327-351.
    • Handle: RePEc:adr:anecst:y:2006:i:83-84:p:327-351
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    File URL: http://www.jstor.org/stable/20079173
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    Cited by:

    1. Schokkaert, Erik & Van de Voorde, Carine, 2009. "Direct versus indirect standardization in risk adjustment," Journal of Health Economics, Elsevier, vol. 28(2), pages 361-374, March.
    2. Fleurbaey, Marc & Schokkaert, Erik, 2009. "Unfair inequalities in health and health care," Journal of Health Economics, Elsevier, vol. 28(1), pages 73-90, January.
    3. Danny Wende, 2019. "Spatial risk adjustment between health insurances: using GWR in risk adjustment models to conserve incentives for service optimisation and reduce MAUP," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(7), pages 1079-1091, September.
    4. S. Veen & R. Kleef & W. Ven & R. Vliet, 2015. "Improving the prediction model used in risk equalization: cost and diagnostic information from multiple prior years," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(2), pages 201-218, March.

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