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Related Experiment Videos

Risk adjustment for a children's capitation rate.

J P Newhouse1, E M Sloss, W G Manning

  • 1Harvard University.

Health Care Financing Review
|March 4, 1994
PubMed
Summary

Few health insurance plans adjust premiums based on a child's health, risking discrimination against those with chronic conditions. Better risk adjusters, using prior health and utilization data, can reduce insurer profits from risk selection.

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Area of Science:

  • Health Economics
  • Healthcare Policy
  • Medical Informatics

Background:

  • Capitation models in healthcare often lack risk adjustment for pediatric populations.
  • This can incentivize insurers to avoid children with chronic diseases and high predicted healthcare expenditures.
  • Discrimination against high-risk children impacts equitable access to care.

Purpose of the Study:

  • To identify and evaluate risk adjusters for pediatric outpatient expenditures.
  • To quantify the potential for insurer profit from risk selection in child health insurance.
  • To inform policy on capitation payment models for children.

Main Methods:

  • Analysis of variance in annual outpatient expenditures.
  • Evaluation of demographic factors (age, gender) as predictors.

Related Experiment Videos

  • Assessment of health status measures and prior utilization data for risk adjustment.
  • Modeling the impact of improved risk adjustment on insurer profits.

    • Main Results:

    • Demographic factors explain only 5% of expenditure variance; health status explains 25%.
    • Prior utilization and health status combined explain 65-70% of expenditure variance.
    • Increased accuracy in risk adjustment disproportionately reduces profits from risk selection.

    Conclusions:

    • Accurate risk adjustment is crucial for mitigating insurer incentives to discriminate against high-cost children.
    • Partial capitation rates may be necessary to prevent 'skimming' (avoiding sick) and 'dumping' (discharging sick patients).
    • Policy interventions are needed to ensure equitable capitation arrangements for pediatric care.