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Incomplete risk adjustment and adverse selection in the German public health insurance system

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  • Knaus, Thomas
  • Nuscheler, Robert

Abstract

The German statutory health insurance market was exposed to competition in 1996. To avoid adverse selection, a prospective risk compensation scheme was introduced in 1994. Due to their low contribution rates, company-based sickness funds were able to attract a lot of new members. We analyze – using data from the German Socio- Economic Panel – the determinants of these transitions from 1995 to 2000. By estimating a simultaneous two equation system, we find that health status positively, and significantly, affects the probability of changing to a company-based sickness fund, especially after controlling for age. Thus the risk compensation scheme does not fully control for the health status of the changers. Consequently, the comparative advantages of company-based funds will increase over time. This observation provides evidence for the standard Rothschild-Stiglitz separating equilibrium. -- In der Gesetzlichen Krankenversicherung wurde 1996 Wettbewerb zwischen den Krankenkassen eingeführt. Um Adverse Selektion zu verhindern wurde 1994 ein prospektiver Risikostrukturausgleich eingeführt. Aufgrund ihrer niedrigen Beitragssätze konnten die Betriebskrankenkassen eine Vielzahl neuer Mitglieder gewinnen. Wir nutzen Daten des Sozio-Oekonomischen Panels (SOEP), um diese Wechselbewegungen für den Zeitraum von 1995 bis 2000 zu analysieren. Ein Zweigleichungssystem wird simultan geschätzt. Es zeigt sich, dass der Gesundheitszustand, nachdem insbesondere für Alter kontrolliert wurde, die Wahrscheinlichkeit zu einer Betriebskrankenkasse zu wechseln signifikant positiv beeinflusst. Der Risikostrukturausgleich gleicht also Unterschiede im Gesundheitszustand nicht vollständig aus. Die komparativen Wettbewerbsvorteile der Betriebskrankenkassen werden somit über die Zeit ansteigen. Dies liefert Evidenz für das bekannte separierende Gleichgewicht von Rothschild und Stiglitz.

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Bibliographic Info

Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number FS IV 02-27.

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Date of creation: 2002
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Handle: RePEc:zbw:wzbmpg:fsiv0227

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Keywords: Health insurance choice; adverse selection; risk compensation; bivariate probit model; health production;

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References

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  1. Dwyer, Debra Sabatini & Mitchell, Olivia S., 1999. "Health problems as determinants of retirement: Are self-rated measures endogenous?," Journal of Health Economics, Elsevier, vol. 18(2), pages 173-193, April.
  2. Johannes Schwarze & Hanfried H. Andersen, 2001. "Kassenwechsel in der gesetzlichen Krankenversicherung: welche Rolle spielt der Beitragssatz?," Discussion Papers of DIW Berlin 267, DIW Berlin, German Institute for Economic Research.
  3. Mallar, Charles D, 1977. "The Estimation of Simultaneous Probability Models," Econometrica, Econometric Society, vol. 45(7), pages 1717-22, October.
  4. Van de ven, Wynand P.M.M. & Ellis, Randall P., 2000. "Risk adjustment in competitive health plan markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 14, pages 755-845 Elsevier.
  5. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
  6. James J. Heckman, 1977. "Dummy Endogenous Variables in a Simultaneous Equation System," NBER Working Papers 0177, National Bureau of Economic Research, Inc.
  7. Alberto HOLLY & Lucien GARDIOL & Gianfranco DOMENIGHETTI & Brigitte BISIG, 1998. "An Econometric Model of Health Care Utilization and Health Insurance in Switzerland," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9803, Université de Lausanne, Faculté des HEC, DEEP.
  8. Doorslaer, Eddy van & Jones, Andrew M., 2003. "Inequalities in self-reported health: validation of a new approach to measurement," Journal of Health Economics, Elsevier, vol. 22(1), pages 61-87, January.
  9. Crossley, Thomas F. & Kennedy, Steven, 2002. "The reliability of self-assessed health status," Journal of Health Economics, Elsevier, vol. 21(4), pages 643-658, July.
  10. Friedrich Breyer & Mathias Kifmann, 2001. "Optionen der Weiterentwicklung des Risikostrukturausgleichs in der GKV," Discussion Papers of DIW Berlin 236, DIW Berlin, German Institute for Economic Research.
  11. John Bound, 1991. "Self-Reported Versus Objective Measures of Health in Retirement Models," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 106-138.
  12. Takeshi Amemiya, 1975. "Qualitative Response Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 4, number 3, pages 363-372 National Bureau of Economic Research, Inc.
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Cited by:
  1. Udo Schneider & Volker Ulrich, 2005. "The Physician-Patient Relationship Revisited - the Patient's View," HEW 0505001, EconWPA.
  2. Udo Schneider & Volker Ulrich & Eberhard Wille, 2008. "Risk Adjustment Systems in Health Insurance Markets in the US, Germany, Netherlands and Switzerland," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 6(3), pages 37-49, October.
  3. 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.

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