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Measuring Selection Incentives in Managed Care: Evidence From the Massachusetts State Employee Insurance Program

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  • Karen Eggleston
  • Anupa Bir

Abstract

Capitation gives insurers incentive to manipulate their offerings to attract the healthy and deter the sick. We calculate the incentives for such service-specific quality distortions using managed care medical and pharmacy spending data for fiscal years 2001 and 2002 from the Massachusetts State Employee Insurance Program. Services most vulnerable to stinting are cardiac care, diabetes care, and mental health and substance abuse services. Empirically, the financial temptation to distort service quality increases nonlinearly with supply-side cost sharing. Our empirical results highlight how selection incentives work at cross-purposes with efforts to reward excellent chronic disease management. Initiatives coupling pay-for-performance with risk adjustment and mixed payment hold promise for aligning incentives with quality improvement. Copyright (c) The Journal of Risk and Insurance, 2009.

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Bibliographic Info

Article provided by The American Risk and Insurance Association in its journal Journal of Risk and Insurance.

Volume (Year): 76 (2009)
Issue (Month): 1 ()
Pages: 159-175

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Handle: RePEc:bla:jrinsu:v:76:y:2009:i:1:p:159-175

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Cited by:
  1. Ronald Eduardo Gómez Suárez, 2007. "Cream-Skimming And Risk Adjustment in Colombian Health Insurance System:: The Public Insurer Case," ARCHIVOS DE ECONOMÍA 004295, DEPARTAMENTO NACIONAL DE PLANEACIÓN.
  2. Gilbert E. Metcalf, 2006. "Value-Added Tax," Discussion Papers Series, Department of Economics, Tufts University 0608, Department of Economics, Tufts University.
  3. Randall P. Ellis & Shenyi Jiang & Tzu-Chun Kuo, 2013. "Does service-level spending show evidence of selection across health plan types?," Applied Economics, Taylor & Francis Journals, vol. 45(13), pages 1701-1712, May.
  4. Karen Eggleston & Randall P. Ellis & Mingshan Lu, 2007. "Prevention and Dynamic Risk Adjustment," Boston University - Department of Economics - Working Papers Series WP2007-023, Boston University - Department of Economics.

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