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Measuring Adverse Selection In Managed Health Care

In: Models of Health Plan Payment and Quality Reporting

Author

Listed:
  • Richard G. Frank
  • Jacob Glazer
  • Thomas G. McGuire

Abstract

Health plans paid by capitation have an incentive to distort the quality of services they offer to attract profitable and to deter unprofitable enrollees. We characterize plans’ rationing as a “shadow price” on access to various areas of care and show how the profit maximizing shadow price depends on the dispersion in health costs, individuals’ forecasts of their health costs, the correlation between use in different illness categories, and the risk adjustment system used for payment. These factors are combined in an empirically implementable index that can be used to identify the services that will be most distorted by selection incentives. ©2000 Elsevier Science B.V. All rights reserved.

Suggested Citation

  • Richard G. Frank & Jacob Glazer & Thomas G. McGuire, 2017. "Measuring Adverse Selection In Managed Health Care," World Scientific Book Chapters, in: Jacob Glazer & Thomas G McGuire (ed.), Models of Health Plan Payment and Quality Reporting, chapter 2, pages 29-57, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813202887_0002
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    More about this item

    Keywords

    Health Insurance; Regulation; Adverse Selection; Efficiency; Fairness; Risk Adjustment; Quality Reporting;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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