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

Risk; Selection;

Direct versus indirect standaardization in risk adjustment

Direct and indirect standardization procedures aim at comparing differences in health or differences in health care expenditures between subgroups of the population after controlling for observable morbidity differences. There is a close analogy between this problem and the issue of risk adjustment in health insurance. We analyse this analogy within the theoretical framework proposed in the recent social choice literature on responsibility and compensation. Traditional methods of risk adjustment are analogous to indirect standardization. They are equivalent to the so-called conditional egalitarian mechanism in social choice. In general, they do not remove incentives for risk selection, even if the effect of non-morbidity variables is correctly taken into account. A method of risk adjustment based on direct standardization (as proposed for Ireland) does remove the incentives for risk selection, but at the cost of violating a neutrality condition, stating that insurers should receive the same premium subsidy for all members of the same risk group. Direct standardization is equivalent to the egalitarianequivalent (or proportional) mechanism in social choice. The conflict between removing incentives for risk selection and neutrality is unavoidable if the health expenditure function is not additively separable in the morbidity and efficiency variables.

Acceptable costs and risk adjustment: policy choices and ethical trade-offs

The main objective of risk adjustment in systems of regulated competition on health insurance markets is the removal of incentives for undesirable risk selection. We introduce a simple conceptual framework to clarify how the definition of "acceptable costs" and the distinction between legitimate and illegitimate risk adjusters imply difficult ethical trade-offs between equity, avoidance of undesirable risk selection and cost-effectiveness. Focusing on the situation in Belgium, Germany, Israel, the Netherlands and Switzerland, we show how differences in the importance attached to solidarity and in the beliefs about market efficiency, have led to different decisions with respect to the definition of the basic benefits package, the choice of risk-adjusters, the possibilities of managed care, the degree of consumer choice and the relative importance of income-related financing sources in the overall system.

Patient socioeconomic determinants of the choice of generic versus brand name drugs in the context of a reference price system: evidence from Belgian prescription data

The generic reference price system (RPS) can impose a financial penalty for patients using a brand name drug instead of its generic alternative. Previous studies on the impact of the RPS have not considered the potentially differential effect of using generic alternatives for individuals with a different socioeconomic background. However, patients’ characteristics might determine their overall knowledge of the existence of the system and thus of the financial burden to which they may be confronted. The association between patients’ characteristics and the use of generic drugs versus brand name drugs was analyzed for ten highly prescribed pharmaceutical molecules included in the Belgian generic reference price system. Prescriptions were obtained from a 10% sample of all general practitioners in 2008 (corresponding to 120,670 adult patients and 368,101 prescriptions). For each pharmaceutical molecule, logistic regression models were performed, with independent variables for patient socioeconomic background at the individual level (work status, having a guaranteed income and being entitled to increased reimbursement of co-payments) and at the level of the neighborhood (education). The percentage of generic prescriptions ranged from 24.7 to 76.4%, and the mean reference supplement in 2008 ranged from €4.3 to €37.8. For seven molecules, higher use of a generic alternative was associated with either having a guaranteed income, with receiving increased reimbursement of co-payments or with living in areas with the lowest levels of education. Globally, results provided evidence that the generic RPS in Belgium does not lead to a higher financial burden on individuals from a low socioeconomic background

Supplementary health insurance as a tool for risk-selection in mandatory basic health insurance markets

As the share of supplementary health insurance (SI) in health care finance is likely to grow, SI may become an increasingly attractive tool for risk-selection in basic health insurance (BI). In this paper, we develop a conceptual framework to assess the probability that insurers will use SI for favourable risk-selection in BI. We apply our framework to five countries in which risk-selection via SI is feasible: Belgium, Germany, Israel, the Netherlands, and Switzerland. For each country, we review the available evidence of SI being used as selection device. We find that the probability that SI is and will be used for risk-selection substantially varies across countries. Finally, we discuss several strategies for policy makers to reduce the chance that SI will be used for risk-selection in BI market