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Incomplete risk adjustment and adverse selection in the German public health insurance system
[Unvollständiger Risikostrukturausgleich und Adverse Selektion in der Gesetzlichen Krankenversicherung Deutschlands]

Author

Listed:
  • 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.

Suggested Citation

  • Knaus, Thomas & Nuscheler, Robert, 2002. "Incomplete risk adjustment and adverse selection in the German public health insurance system
    [Unvollständiger Risikostrukturausgleich und Adverse Selektion in der Gesetzlichen Krankenversicherung
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-27, Social Science Research Center Berlin (WZB).
  • Handle: RePEc:zbw:wzbmpg:fsiv0227
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    File URL: https://www.econstor.eu/bitstream/10419/51123/1/363086609.pdf
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    References listed on IDEAS

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    9. 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.
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    Citations

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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. Udo Schneider & Volker Ulrich & Eberhard Wille, 2008. "Risk Adjustment Systems in Health Insurance Markets in the US, Germany, Netherlands and Switzerland," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 6(3), pages 37-49, October.
    3. Udo Schneider & Volker Ulrich, 2008. "The physician-patient relationship revisited: the patient’s view," International Journal of Health Economics and Management, Springer, vol. 8(4), pages 279-300, December.

    More about this item

    Keywords

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

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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