IDEAS home Printed from https://ideas.repec.org/a/cje/issued/v45y2012i4p1586-1607.html
   My bibliography  Save this article

Risk adjustment and prevention

Author

Listed:
  • Karen Eggleston
  • Randall P. Ellis
  • Mingshan Lu

Abstract

Widespread integration of market-based incentives into healthcare systems calls for - and has elicited - increasing adoption of risk adjustment. By deterring selection, risk adjustment helps to assure fair and efficient payments among health insurers or capitated provider groups. However, since conventional risk adjustment allocates funds among regions or insurers according to current population health status, it does not reward - indeed, it penalizes - preventive efforts that improve population health. This prevention penalty of risk adjustment represents a hidden cost of unclear magnitude, undermining provider incentives for health promotion. We develop a theoretical model of selection and prevention demonstrating this problem with conventional risk adjustment and suggesting a simple alternative: risk adjustment should be linked to pay-for-performance for prevention.

Suggested Citation

  • Karen Eggleston & Randall P. Ellis & Mingshan Lu, 2012. "Risk adjustment and prevention," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1586-1607, November.
  • Handle: RePEc:cje:issued:v:45:y:2012:i:4:p:1586-1607
    as

    Download full text from publisher

    File URL: http://economics.ca/cgi/xms?jab=v45n4/CJEv45n4p1586.pdf
    File Function: Full text
    Download Restriction: Available to subscribers only. Alternative access through JSTOR and Ingenta.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cje:issued:v:45:y:2012:i:4:p:1586-1607. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Werner Antweiler). General contact details of provider: http://edirc.repec.org/data/ceaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.