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Managing risk in a risky world.

S R Eastaugh1

  • 1Department of Health Policy and Management, School of Public Health and Health Services, George Washington University, Washington, DC, USA.

Journal of Health Care Finance
|March 27, 1999
PubMed
Summary

Managed care plans need better risk adjustment methods to fairly pay for high-cost patients. A new mixed payment system can improve equity and reward quality care for complex conditions.

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Area of Science:

  • Health Economics
  • Healthcare Management
  • Risk Management

Background:

  • Capitation managed care plans face challenges due to slow innovation in risk adjustment.
  • Concerns exist regarding Medicare severity adjustments potentially reducing rates for managed care firms.
  • Current risk prediction methods may lead to discrimination against sick patients and undercare.

Purpose of the Study:

  • To explore the need for retooled insurance risk prediction methods.
  • To advocate for a more equitable marketplace in healthcare.
  • To propose solutions for managing financial risks associated with high-cost patients.

Main Methods:

  • Analysis of current risk adjustment systems in managed care.
  • Discussion of potential impacts of Medicare severity adjustments.
  • Proposal of a mixed payment system combining capitation and prospective payments.

Main Results:

  • Slow innovation in risk adjustment is impacting managed care plan popularity.
  • A new mixed payment system is suggested to address inequities.
  • This system aims to prevent "cream skimming" and reward quality providers.

Conclusions:

  • Risk adjustment systems require significant innovation to ensure fairness.
  • Payers should invest in developing valid severity adjustment systems.
  • A mixed payment model can create a more equitable system rewarding quality care for complex diseases.

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