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Pediatric carve outs. The use of disease-specific conditions as risk adjusters in capitated payment systems
J S Andrews1, G F Anderson, C Han
1Department of Pediatrics, Johns Hopkins Medical Institutions, Baltimore, Md, USA.
Insights
To prevent adverse selection in healthcare, this study identified high-cost pediatric conditions for separate reimbursement. These "carve outs" help capitated payment systems manage financial risk more effectively.
Area of Science:
- Health economics
- Pediatric healthcare management
- Insurance risk assessment
Background:
- Capitated payment systems face challenges with adverse selection.
- Identifying high-cost pediatric conditions is crucial for financial risk management.
Purpose of the Study:
- To develop a list of pediatric disease-specific "carve outs" for separate reimbursement.
- To mitigate adverse selection in capitated payment systems.
Main Methods:
- Descriptive study utilizing Washington State Medicaid cost data from fiscal year 1993.
- Analysis of 302,240 pediatric patients to identify conditions meeting criteria: high cost, low cost variability, and significant medical spending.
Main Results:
- 0.2% of patients incurred costs >= $25,000 annually.
- Top 10% of cases accounted for two-thirds of total spending.
- Key conditions identified include prematurity complications, neoplasms, congenital heart disease, organ transplants, congenital anomalies, and respiratory problems.
Conclusions:
- Disease-specific "carve outs" can aid Medicaid plans and insurers in managing risk selection.
- This approach supports fairer reimbursement in capitated payment systems.
Objective:
To address the issue of adverse selection in capitated payment systems by developing a list of disease-specific pediatric conditions (i.e., "carve outs") to be considered for separate reimbursement.
Design:
A descriptive study using a large Medicaid database.
Intervention:
With the use of fiscal year 1993 Washington State Medicaid cost data for 302,240 pediatric patients, a list of disease-specific carve outs was developed to meet the following criteria: high cost, low variability in cost, and association with a large proportion of medical spending.
Results:
Six-hundred seventy-three patients (0.2%) in the database had annual costs totaling $25,000 or more. Ten percent of the cases accounted for approximately two thirds of spending, while the least expensive 70% of cases made up only 15% of the expenditures. Prematurity and complications of prematurity, neoplasms, congenital heart disease, organ transplantations, congenital anomalies, and respiratory problems were general categories of disease that met our criteria for a carve out. The association of a major surgical procedure with a diagnosis increased the predictive accuracy for high cost.
Conclusion:
Lists of disease-specific carve outs such as this one can be used by Medicaid plans and other insurers who are concerned about risk selection to identify conditions for separate reimbursement in capitated payment systems.