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Improving risk-equalization in Switzerland: Effects of alternative reform proposals on reallocating public subsidies for hospitals

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  • Beck, Konstantin
  • Kauer, Lukas
  • McGuire, Thomas G.
  • Schmid, Christian P.R.

Abstract

The Swiss healthcare financing system is on the verge of one of its largest reforms. The Swiss parliament is currently debating how to reallocate about 20 % of total health expenditures. Swiss cantons make substantial tax-funded contributions to health expenditures by paying 55 % of hospital inpatient costs. As health insurers are fully responsible for all outpatient costs, the present system may provide unintended incentives to treat patients in inpatient settings. This paper presents and evaluates three alternative reform proposals for the reallocation of the cantonal contribution. Two proposals are currently under consideration in the Swiss parliament, suggesting either partial cost-sharing (20 %) of all healthcare costs or inclusion of cantonal contributions into the risk-equalization fund. A third option is developed in this paper, which proposes using the cantonal funds to pay a share of insurer’s expenses above a high-cost threshold. The high-cost risk-sharing alternative is clearly superior: it mitigates the incentive to discriminate against sicker individuals, improves incentives for cost control, and reduces risk of loss for insurers. The paper adds results from Switzerland to an international literature on the properties of adding high-cost risk sharing to a risk equalization model.

Suggested Citation

  • Beck, Konstantin & Kauer, Lukas & McGuire, Thomas G. & Schmid, Christian P.R., 2020. "Improving risk-equalization in Switzerland: Effects of alternative reform proposals on reallocating public subsidies for hospitals," Health Policy, Elsevier, vol. 124(12), pages 1363-1367.
    • Handle: RePEc:eee:hepoli:v:124:y:2020:i:12:p:1363-1367
    DOI: 10.1016/j.healthpol.2020.08.011
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    References listed on IDEAS

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    1. Schmid, Christian P.R. & Beck, Konstantin, 2016. "Re-insurance in the Swiss health insurance market: Fit, power, and balance," Health Policy, Elsevier, vol. 120(7), pages 848-855.
    2. Kauer, Lukas & McGuire, Thomas G. & Beck, Konstantin, 2020. "Extreme under and overcompensation in morbidity-based health plan payments: The case of Switzerland," Health Policy, Elsevier, vol. 124(1), pages 61-68.
    3. Schillo, Sonja & Lux, Gerald & Wasem, Juergen & Buchner, Florian, 2016. "High cost pool or high cost groups—How to handle high(est) cost cases in a risk adjustment mechanism?," Health Policy, Elsevier, vol. 120(2), pages 141-147.
    4. Richard C. Kleef & Thomas G. McGuire & René C. J. A. Vliet & Wynand P. P. M. de Ven, 2017. "Improving risk equalization with constrained regression," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(9), pages 1137-1156, December.
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    Cited by:

    1. Josefa Henriquez & Marica Iommi & Thomas McGuire & Emmanouil Mentzakis & Francesco Paolucci, 2023. "Designing feasible and effective health plan payments in countries with data availability constraints," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 90(1), pages 33-57, March.

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