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PubMed2002

One hundred and eighteen years of the German health insurance system: are there any lessons for middle- and low-income countries?

A number of low and middle income countries (LMICs) are considering social health insurance (SHI) for adoption into their social and economic environment or striving to sustain and improve already existing SHI schemes. SHI was first introduced in Germany in 1883. An analysis of the German system from its inception up to today may yield lessons relevant to other countries. Such an analysis, however, is largely lacking, especially with regard to LMICs. This paper attempts to fill this gap. For each of the following lessons, it considers if and under which conditions they may be of relevance to LMICs. First, small, informal, voluntary health insurance schemes may serve as learning models for fund administration and solidarity, but in order to achieve universal coverage government action is needed to formalise these schemes and to introduce a principle of compulsion. Once compulsory health insurance exists for some people, incremental expansion of coverage to other regions and social groups may be feasible to achieve universality. Second, in order to ensure sustainability of SHI, the mandated benefit package should be adapted incrementally in accordance with changing needs, values and economic circumstances. Third. in a pluralistic SHI system equity, as well as risk pooling and spreading, can be enhanced if funds merge. The optimal number of funds, however, will depend on the stage of development of the SHI system as well as on other objectives of the system, including choice and competition. A risk equalisation scheme may prevent the adverse effects of risk selection, if competition between insurance funds is introduced into the system. Fourth, as an alternative to both state and market regulation, self-governance may serve as a source of stability and sustainability as well as a means of decentralising and democratising a health care system. Finally, costs can be successfully contained in a fee-for-service system, if cost-escalating provider behaviour is constrained by either political pressure or technical means.

Developing Countries↗
PubMed1994

Managed care plan performance since 1980. A literature analysis.

OBJECTIVE: To compare the health care utilization, expenditure, quality of care, and satisfaction since 1980 of enrollees in managed care and indemnity plans. DATA SOURCES AND STUDY SELECTION: Studies selected met the following criteria: data from 1980 forward, private insurance or Medicare enrollees, a comparison group, a reasonable attempt at statistical adjustment for noncomparable managed care and indemnity plan enrollees, and peer-reviewed findings (with two exceptions). Few studies on preferred provider organization plan performance met the selection criteria. DATA SYNTHESIS: Compared with indemnity plans, health maintenance organization plans had somewhat lower hospital admission rates, 1% to 20% shorter hospital length of stay, the same or more physician office visits per enrollee, less use of expensive procedures and tests, greater use of preventive services, mixed results on outcomes, and somewhat lower enrollee satisfaction with services but higher satisfaction with costs. The evidence does not support the hypothesis that prepaid group practice or staff model health maintenance organizations are more effective than individual practice association or network model health maintenance organizations. CONCLUSIONS: Although this literature analysis found several clear patterns of results, several factors, including unmeasured selection bias, diverse and rapidly changing health plans and local market conditions, and relatively few research results, suggest that generalizations must be made with caution.

Health Care Costs↗
PubMed2003

Medical care use and selection in a social health insurance with an equalization fund: evidence from Colombia.

This paper studies the relationship between health status and insurance participation, and between insurance status and medical use in the context of a social health insurance with an equalization fund (SHIEF). Under this system, revenues from a mandatory payroll tax are collected into a single pool (equalization fund) that reimburses for-profit insurance companies according to a capitated formula. Although competition should induce insurers to control costs without reducing the quality of service necessary to attract consumers, limitations in the capitation formula might induce insurers to select against bad risks, and limitations in the contribution system might induce more healthy individuals to evade enrollment. A three-equation model having social health insurance, private health insurance, and using medical services is estimated using a 1997 Colombian household survey. Consistent with similar studies, participation in SHIEF increases medical care use. On the other hand, the evidence on selection is somewhat mixed: individuals who report good health status are more likely to participate in SHIEF, while those without a chronic condition are less likely to participate in SHIEF.

Capitation Fee↗
PubMed1997

The potential role of risk-equalization mechanisms in health insurance: the case of South Africa.

International agencies such as the World Bank have widely advocated the use of health insurance as a way of improving health sector efficiency and equity in developing countries. However, in developing countries with well-established, multiple-player health insurance markets, such as South Africa, extension of insurance coverage is now inhibited by problems of moral hazard, and associated cost escalation and fragmentation of insurer risk-pools. Virtually no research has been done on the problem of risk selection in health insurance outside developed countries. This paper provides a brief overview of the problem of risk fragmentation as it has been studied in developed countries, and attempts to apply this to middle-income country settings, particularly that of South Africa. A number of possible remedial measures are discussed, with risk-equalization funds being given the most attention. An overview is given of the risk-equalization approach, common misconceptions regarding its working and the processes that might be required to assess its suitability in different national settings. Where there is widespread public support for social risk pooling in health care, and government is willing and able to assume a regulatory role to achieve this, risk-equalization approaches may achieve significant efficiency and equity gains without destroying the positive features of private health care financing, such as revenue generation, competition and free choice of insurer.

Actuarial Analysis↗
PubMed2000

Risk adjusting capitation: applications in employed and disabled populations.

Risk adjustment may be a sensible strategy to reduce selection bias because it links managed care payment directly to the costs of providing services. In this paper we compare risk adjustment models in two populations (public employees and their dependents, and publicly-insured low income individuals with disabilities) in Washington State using two statistical approaches and three health status measures. We conclude that a two-part logistic/GLM statistical model performs better in populations with large numbers of individuals who do not use health services. This model was successfully implemented in the employed population, but the managed care program for the publicly insured population was terminated before risk adjustment could be applied. The choice of the most appropriate health status measure depends on purchasers' principles and desired outcomes.

Adolescent↗
PubMed1999

Cross-national comparison of capitation funding: the American, British and Dutch experience.

In this paper we review the performance of the capitation payment systems of three countries--the Adjusted Average Per Capita Cost (AAPCC) system used in the United States to reimburse Health Maintenance Organizations (HMOs) for insuring Medicare recipients, a somewhat similar system in the Netherlands which reimburses third-party payers for insuring the entire population and a weighted system utilized in Britain for regional funding. Our review revealed significant problems with the current version of the AAPCC formula as there is evidence of the biased selection of beneficiaries and actual losses to Medicare through its use. Furthermore, several studies show that the demographic adjusters utilized in the AAPCC formula are extremely poor predictors of future healthcare utilization relative to the potential of direct and indirect health status measures. The Dutch experience with capitated funding has been similar to that of the United States. While Dutch researchers have built on the work of their American counterparts they acknowledge that further work is needed before a fully functional system is implemented. Britain's weighted system has fulfilled its original mandate to redistribute healthcare resources based on population need but recent changes giving increased influence to age weighting could reverse some of these gains. A number of proposed improvements to these risk adjustment problems were reviewed including the development of diagnostic cost groups, the coexisting hierarchical conditions model and the use of community-rated high-risk pooling. The findings from this study can help others narrow the alternatives they need to consider when thinking of introducing capitation funding or refining already existing systems.

Capitation Fee↗
PubMed1999

Selection experiences in Medicare HMOs: pre-enrollment expenditures.

Using 1993 and 1994 data, the authors examine whether beneficiaries who enroll in a Medicare health maintenance organization (HMO), including those enrolling for only a short period of time, have lower expenditures than continuous fee-for-service (FFS) beneficiaries the year prior to enrollment. We also test whether biased selection varies by the level of HMO market penetration and the rate of market-share growth. We find favorable selection associated with enrollment into Medicare HMOs, which declines as market share increases but does not disappear. Among short-term enrollees, we find unfavorable selection, however, selection bias was not sensitive to market characteristics.

Aged↗
PubMed1998

Cream-skimming in deregulated social health insurance: evidence from Switzerland.

Policymakers fear that health insurers when exposed to competition will engage in cream-skimming (i.e. selection of good risks) rather than trying to improve their benefit to premium ratio. This fear surfaced also when Swiss federal government proposed pro-competitive Law on social health insurance, which barely passed a popular referendum in 1994. While a risk equalization mechanism based on age, gender, and place of residence has already been created, there is a considerable interest in improving its formula. This paper shows that a dummy variable indicating an individual's death during the period of observation causes the coefficient of determination to jump from 0.039 to 0.111. More-over, simulations of the risk selection process suggest that risk equalization should be made a permanent institution rather than being limited to a life of 10 years as prescribed by present legislation. In fact, the formula in use, with all its shortcomings, can be shown to neutralize to a great extent insurer interest in cream skimming provided he takes a longer-run view.

Actuarial Analysis↗
PubMed1996

Policy implications of risk selection in Medicare HMOs: is the federal payment rate too high?

For more than a decade, Medicare beneficiaries have had the option to enroll in risk-contract health maintenance organizations (HMOs) in which the federal payment is set at 95 percent of the estimated fee-for-service cost. Two questions have been raised by health policy researchers ever since: Are Medicare HMO enrollees healthier than the elderly who receive fee-for-service care? If so, does the government payment rate for Medicare HMOs accurately reflect the costs that would have been incurred by a healthier population? This Issue Brief discusses three recent studies of the extent to which risk-contract HMOs experience biased selection and the cost of this to Medicare.

Aged↗
PubMed1999

Medical savings accounts: microsimulation results from a model with adverse selection.

This paper examines medical savings accounts combined with high-deductible catastrophic health plans (MSA/CHPs), exploring the possible consequences of making tax preferred MSA/CHPs available to the entire employment-related health insurance market. The paper uses microsimulation methods to examine the equilibrium effects of MSA/CHPs on health care and non-health care expenditures, tax revenues, insurance premiums, and exposure to risk. If MSA/CHPs are offered alongside comprehensive plans, biased MSA/CHP enrollment can lead to premium spirals that drive out comprehensive coverage. Our estimates also raise concerns about equity, insofar as those who stand to lose the most tend to be poorer and in families with infant children.

Demography↗
PubMed1996

Evidence for selective health maintenance organization enrollment among children and adolescents covered by Medicaid.

OBJECTIVE: To determine whether children and adolescents are selectively enrolled in health maintenance organizations (HMOs) based on age, gender, diagnosis, or prior utilization. DESIGN: Case-control study. New HMO enrollees were compared with a control population of non-HMO enrollees. SETTING: Medicaid claims data and HMO participation records for the Medicaid and Aid to Families of Dependent Children sector in Baltimore, Md. RESULTS: Controlling for age, significant differences in prior health care utilization as measured by Medicaid expenditures and hospital days were noted. Children enrolling in HMOs had significantly lower prior utilization than children from the control population as measured by dollar expenditures and hospital days. Young children enrolling in HMOs were only half as likely to have prior claims for asthma. Conversely, adolescents enrolling in HMOs had significantly higher prior utilization than adolescents from the control population. The difference among adolescents was due to a higher birth rate among new HMO enrollees in that age bracket. CONCLUSIONS: Voluntary HMO enrollment of children covered by Medicaid and Aid to Families of Dependent Children sector was subject to selection biases that may be economically favorable to the HMOs and may undermine the cost-containment goals of prepaid health care for Medicaid participants. Voluntary capitated systems where fee-for-service remains a significant alternative must monitor for these selection biases that are not allowed for in the adjustments to capitation rates.

Adolescent↗
PubMed2003

Risk adjustment and risk sharing: the Israeli experience.

Israel, like several other countries, introduced a national risk adjusted capitation system during the 1990s. However, the Israeli move was drastic, implementing from the beginning a fully prospective risk adjustment scheme based on age, supplemented by a 100% five condition-specific risk sharing. That scheme, together with open enrollment (periodic switching options), was intended to transform an unregulated competitive health insurance market, characterized by adverse selection and preferred risk selection, into managed competition assuring quality of care, efficiency and fairness. This paper presents the Israeli experience during the first 6 years of the reformed system, focusing on issues related to the risk adjustment and risk sharing arrangements.

Adolescent↗
PubMed2004

Risk selection and the specification of the conventional risk adjustment formula.

We argue that a sharp distinction must be made between the empirical problem of finding the best equation for explaining medical expenditures and the normative question of deriving capitations which give health plans the appropriate incentives. We propose a procedure, taken from the social choice literature, to go from the estimated equations to the capitations. If the estimated equations are not additively separable in legitimate and illegitimate risk-adjusters, it is impossible to remove all incentives for risk selection while respecting at the same time a straightforward requirement of horizontal equity. This has immediate implications for the choice of the functional form. Moreover, in so far as the conventional risk adjustment literature only includes so-called "legitimate" risk-adjusters in the estimations, its results may suffer from omitted variables-bias. We illustrate our general methodological points with empirical results, obtained from a cross-section of 321,111 Belgian patients.

Adolescent↗
PubMed2000

Favorable selection in the Medicare+Choice program: new evidence.

Historically, studying the Medicare managed care favorable-selection issue has been difficult because direct data on managed care enrollees have been unavailable. In this study, we analyzed the first year of Balanced Budget Act (BBA)-mandated inpatient encounter data. Based on this comparison of actual managed care and fee-for-service (FFS) beneficiaries, it appears that there are significant differences between these populations. The most striking differences are found in the comparison of average risk factors, indicating a clear bias in the managed care populations toward beneficiaries predicted to be less costly.

Aged↗
PubMed1996

Can managed care save Medicare? Achieving high quality and low costs through managed care.

The article tackles the broad questions that currently engage policy makers grappling with Medicare managed care: quality, satisfaction, selection bias, disenrollment trends, cost savings, and the full savings potential of HMOs. HMOs have been shown to perform well in both the private sector and the Medicare Risk program on all of these dimensions, although the Risk program's flawed payment methodology limits the overall cost savings to Medicare.

Capitation Fee↗