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Related Experiment Videos

Predictability and predictiveness in health care spending.

Randall P Ellis1, Thomas G McGuire

  • 1Economics Department, Boston University, 270 Bay State Road, Boston, MA 02215, USA. ellisrp@bu.edu

Journal of Health Economics
|August 16, 2006
PubMed
Summary

Health plan spending predictability, predictiveness, and demand responsiveness influence adverse selection. An empirical index quantifies these selection incentives across healthcare services, applicable to Medicare and other payers.

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Area of Science:

  • Health Economics
  • Healthcare Management
  • Public Health Policy

Background:

  • Adverse selection poses challenges in health insurance markets.
  • Understanding factors influencing health plan choices is crucial for market stability.
  • Previous research has explored service-level selection but lacked a unified index.

Purpose of the Study:

  • To re-examine the relationship between health care spending predictability and adverse selection incentives.
  • To develop an empirical index to quantify adverse selection incentives.
  • To apply this index to analyze Medicare service-level selection.

Main Methods:

  • Development of an explicit model of health plan decisions regarding service levels.
  • Identification of predictability, predictiveness, and demand responsiveness as key factors.

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  • Quantification of an empirical index based on these three measures.

    • Main Results:

    • Predictability, predictiveness, and demand responsiveness significantly impact adverse selection incentives.
    • The product of these factors defines an index for the direction and magnitude of selection incentives.
    • The study quantifies the relative magnitude of adverse selection incentives for various Medicare services.

    Conclusions:

    • The developed index provides a measurable tool for understanding adverse selection.
    • Results align with existing research on service-level selection in healthcare.
    • The empirical index is adaptable for use with data from diverse payers beyond Medicare.