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Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces

We study the extremely high and low residual spenders in individual health insurance markets in three countries. A high (low) residual spender is someone for whom the residual—spending less payment (from premiums and risk adjustment)—is high (low), indicating that the person is highly underpaid (ove...

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Autores principales: McGuire, Thomas G., Schillo, Sonja, van Kleef, Richard C.
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer Berlin Heidelberg 2020
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7822791/
https://www.ncbi.nlm.nih.gov/pubmed/32862358
http://dx.doi.org/10.1007/s10198-020-01227-3
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author McGuire, Thomas G.
Schillo, Sonja
van Kleef, Richard C.
author_facet McGuire, Thomas G.
Schillo, Sonja
van Kleef, Richard C.
author_sort McGuire, Thomas G.
collection PubMed
description We study the extremely high and low residual spenders in individual health insurance markets in three countries. A high (low) residual spender is someone for whom the residual—spending less payment (from premiums and risk adjustment)—is high (low), indicating that the person is highly underpaid (overpaid). We begin with descriptive analysis of the top and bottom 1% and 0.1% of residuals building to address the question of the degree of persistence in membership at the extremes. Common findings emerge among the countries. First, the diseases found among those with the highest residual spending are also disproportionately found among those with the lowest residual spending. Second, those at the top of the residual spending distribution (where spending exceeds payments the most) account for a massively high share of the unexplained variance in the predictions from the risk adjustment model. Third, in terms of persistence, we find that membership in the extremes of the residual spending distribution is highly persistent, raising concerns about selection-related incentives targeting these individuals. As our results show, the one-in-a-thousand people (on both sides of the residual distribution) play an outsized role in creating adverse incentives associated with health plan payment systems. In response to the observed importance of the extremes of the residual spending distribution, we propose an innovative combination of risk-pooling and reinsurance targeting the predictively undercompensated group. In all three countries, this form of risk sharing substantially improves the overall fit of payments to spending. Perhaps surprisingly, by reducing the burden on diagnostic indicators to predict high payments, our proposed risk sharing policy reduces the gap between payments and spending not only for the most undercompensated individuals but also for the most overcompensated people.
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spelling pubmed-78227912021-02-11 Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces McGuire, Thomas G. Schillo, Sonja van Kleef, Richard C. Eur J Health Econ Original Paper We study the extremely high and low residual spenders in individual health insurance markets in three countries. A high (low) residual spender is someone for whom the residual—spending less payment (from premiums and risk adjustment)—is high (low), indicating that the person is highly underpaid (overpaid). We begin with descriptive analysis of the top and bottom 1% and 0.1% of residuals building to address the question of the degree of persistence in membership at the extremes. Common findings emerge among the countries. First, the diseases found among those with the highest residual spending are also disproportionately found among those with the lowest residual spending. Second, those at the top of the residual spending distribution (where spending exceeds payments the most) account for a massively high share of the unexplained variance in the predictions from the risk adjustment model. Third, in terms of persistence, we find that membership in the extremes of the residual spending distribution is highly persistent, raising concerns about selection-related incentives targeting these individuals. As our results show, the one-in-a-thousand people (on both sides of the residual distribution) play an outsized role in creating adverse incentives associated with health plan payment systems. In response to the observed importance of the extremes of the residual spending distribution, we propose an innovative combination of risk-pooling and reinsurance targeting the predictively undercompensated group. In all three countries, this form of risk sharing substantially improves the overall fit of payments to spending. Perhaps surprisingly, by reducing the burden on diagnostic indicators to predict high payments, our proposed risk sharing policy reduces the gap between payments and spending not only for the most undercompensated individuals but also for the most overcompensated people. Springer Berlin Heidelberg 2020-08-29 2021 /pmc/articles/PMC7822791/ /pubmed/32862358 http://dx.doi.org/10.1007/s10198-020-01227-3 Text en © The Author(s) 2020 Open AccessThis article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
spellingShingle Original Paper
McGuire, Thomas G.
Schillo, Sonja
van Kleef, Richard C.
Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces
title Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces
title_full Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces
title_fullStr Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces
title_full_unstemmed Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces
title_short Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces
title_sort very high and low residual spenders in private health insurance markets: germany, the netherlands and the u.s. marketplaces
topic Original Paper
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7822791/
https://www.ncbi.nlm.nih.gov/pubmed/32862358
http://dx.doi.org/10.1007/s10198-020-01227-3
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