Modest risk-sharing significantly reduces health plans’ incentives for service distortion

Shuli Brammli-Greenberg, Jacob Glazer, Ruth Waitzberg

Research output: Contribution to journalArticlepeer-review

Abstract

Public payers often use payment mechanisms as a way to improve the efficiency of the healthcare system. One source of inefficiency is service distortion (SD) in which health plans over/underprovide services in order to affect the mix of their enrollees. Using Israeli data, we apply a new measure of SD to show that a mixed payment scheme, with a modest level of cost-sharing, yields a significant improvement over a pure risk-adjustment scheme. This observation implies that even though mixed systems induce overprovision of some services, their benefits far outweigh their costs.

Original languageEnglish
Pages (from-to)1359-1374
Number of pages16
JournalEuropean Journal of Health Economics
Volume20
Issue number9
DOIs
StatePublished - 1 Dec 2019

Keywords

  • Adverse selection
  • Capitation
  • Managed care
  • Managed competition
  • Payment mechanisms
  • Risk-adjustment
  • Risk-sharing
  • Service distortion

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