Measuring Adverse Selection in Managed Health Care / Richard G. Frank, Jacob Glazer, Thomas G. McGuire.

Format:

Book

Author/Creator:

Frank, Richard G.

Contributor:

National Bureau of Economic Research.

Glazer, Jacob.

McGuire, Thomas G.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6825.

NBER working paper series no. w6825

Language:

English

Subjects (All):

Managed care plans (Medical care).

Adverse selection (Insurance).

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1998.

Cambridge, Massachusetts : National Bureau of Economic Research, 1998.

Summary:

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 imposing a show that the profit maximizing shadow price depends on the dispersion in health costs, how well individuals forecast their health costs, the correlation between use in different illness categories, and the risk adjustment system used for payment. We further show how these factors can be combined in an empirically implementable index that can be used to identify the services that will be most distorted in competition among managed care plans. A simple welfare measure is developed to quantify the distortion caused by selection incentives. We illustrate the application of our ideas with a Medicaid data set, and conduct policy analyses of risk adjustment and other options for dealing with adverse selection.

Notes:

Print version record

December 1998.