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Risk Selection, Risk Adjustment and Choice: Concepts and Lessons from the Americas Randall P. Ellis 1 Juan Gabriel Fernandez 2 1 Boston University 2 University.

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Presentation on theme: "Risk Selection, Risk Adjustment and Choice: Concepts and Lessons from the Americas Randall P. Ellis 1 Juan Gabriel Fernandez 2 1 Boston University 2 University."— Presentation transcript:

1 Risk Selection, Risk Adjustment and Choice: Concepts and Lessons from the Americas Randall P. Ellis 1 Juan Gabriel Fernandez 2 1 Boston University 2 University of Chile and Chile Ministry of Health Presentation prepared for the V Congreso Economia de la Salud de America Latina y el Caribe November 15-16, 2012, Montevideo, Uruguay

2 Key Policy Paradigm Choice Choice of what? Providers – provide services Health plans – pay providers Sponsors – collect from consumers, pay health plans Choice + heterogeneity Incentive to select Regulations + payment policy reduce selection Competition?

3 Four questions examined for Canada, Chile, Colombia and United States How are payments and contracting arranged in the health care system? What choices are allowed? What are the perceived selection problems? Efficiency problems Equity/fairness problems What selection tools are used that worsen or reduce selection? Goal is to understand how to better use of risk adjustment, risk sharing, and regulations

4 Four agents and five primary contracting relationships SponsorHealth plans B D A C E ConsumersProviders

5 Four agents and six primary contracting relationships SponsorHealth plans B D A C E ConsumersProviders

6 Consumer choice of providers Consumer choice of providers SponsorHealth plans B D A C E ConsumersProviders

7 Consumer choice of providers Consumer choice of providers SponsorHealth plans B D A C E ConsumersProviders YES: Canada Chile public* Chile private Colombia* US private* US Medicare* NO:

8 Provider choice of consumers? SponsorHealth plans B D A C E ConsumersProviders YES: Chile private Colombia US NO: Canada Chile public US Medicare pre 1985 Selection problems Risk solidarity problem Patient sorting problem Overpaying/un derpaying problem

9 Health plan choice of provider (Selective contracting) SponsorHealth plans B D A C E ConsumersProviders YES: US private US Medicare Chile Colombia NO: Canada US Medicare pre 1985 Selection problems Service distortion problem Wasted administration costs

10 Provider choice of health plan SponsorHealth plans B D A C E ConsumersProviders YES: US private US Medicare HMOS Chile private Colombia NO: Canada US Medicare pre 1985 Selection problems Wasted administration costs Balance billing problems Patient sorting problem

11 Consumer choice of health plans? SponsorHealth plans B D A C E ConsumersProviders YES: US private US Medicare Chile private Colombia NO: Canada Chile public US Medicare before 1985 Selection problems Wasted administration costs problem Plan turnover problem Risk solidarity problem

12 Health plan choice of consumers? SponsorHealth plans B D A C E ConsumersProviders YES: USA private Chile Colombia NO: Canada US Medicare US private after 2014 Selection problems Wasted administration costs problem Plan turnover problem Risk solidarity problem

13 Consumer Choice of Sponsor Sponsor Choice of Health Plans SponsorHealth Plans B D A C E ConsumersProviders YES: US Private Colombia Chile NO: Canada US Medicare US private after 2020? Selection problems Incomplete insurance Wasted administration costs problem Labor market problems Plan turnover problem Risk solidarity problem Income solidarity problem Free rider problem

14 Strategies to reduce selection problems Regulations Risk Adjustment Risk Sharing

15 USA Medicare, 1985: very little choice Sponsor=InsurerHealth plans ConsumersProviders MEDI- GAP Plans HospitalsDoctors Government Traditional Indemnity Medicare Enrollees Ellis and van de Ven, 2003 Selection problems? Hospital dumping due to DRGs Hospital service distortion due to DRGs Risk solidarity problem due to MEDIGAP Income solidarity problem due to MEDIGAP

16 USA Medicare, 2004 SponsorHealth plans ConsumersProviders MEDI- GAP Plans M+C HMOs Government Traditional Indemnity Private FFS Medicare Enrollees DrugsHospitalsDoctors Ellis and van de Ven, 2003 Selection problems Wasted administration costs Plan turnover Service distortions Dumping Risk solidarity problem Income solidarity problem

17 USA Privately Employed, 2010 SponsorHealth Plans B Indemnity Plans ConsumersProviders Phar- macy Plans No Insurance Employees and families HMOs DrugsHospitalsDoctors Employer Ellis and van de Ven, 2003 Selection problems Incomplete insurance Wasted administration costs Labor market problems Plan turnover Free rider problem Service distortions Dumping Risk solidarity problem Income solidarity problem

18 Canada (Alberta) 2003 Source: Ellis and Van de Ven, 2003 ConsumersProviders All Individuals Budget HospitalsDrugsDoctors Provincial Government Regional HealthAuthorities FFS Coverage Supple- mentary Plans Sponsor = Insurer = Health plan Selection problems Risk solidarity problem across regions

19 SPONSOR = INSURER = HEALTH PLAN = PROVIDER (HOSPITALS) CONSUMERS PROVIDERS AD FIGURE 2: ALBERTA (CANADA): DOCTORSDRUGS PROVINCIAL GOVERMENT ALBERTA HEALTH SERVICES (AHS) Fee for Service HOSPITALS E

20 SPONSOR CONSUMERS A FIGURE 3: US MEDICARE (for Aged and Disabled) 1985 PRIVATE PROVIDERS D C E DOCTORS HOSPITALS DRUGS HEALTH PLAN B TRADITIONAL INDEMNITY GOVERNMENT Medicare Enrollees

21 SPONSOR CONSUMERS A FIGURE 4: US MEDICARE (2009) PRIVATE PROVIDERS C E DOCTORS HOSPITALS DRUGS HEALTH PLAN B TRADITIONAL INDEMNITY GOVERNMENT Medicare Enrollees Medicare Advantage Private FFS PART D (Drugs) D

22 SPONSOR CONSUMERS A FIGURE 5: US - PRIVATELY INSURED (LARGE FIRMS) PRIVATE PROVIDERS D C E DOCTORS HOSPITALS DRUGS HEALTH PLAN B EMPLOYER INDEMNITY HMOs PPOs Pharmacy Plans

23 SPONSOR CONSUMERS A FIGURE 5: US - PRIVATELY INSURED (LARGE FIRMS) 2010 PRIVATE PROVIDERS D C E DOCTORS HOSPITALS DRUGS HEALTH PLAN B EMPLOYER INDEMNITY HMOs PPOs Pharmacy Plans No Insurance

24 SPONSOR CONSUMERS A FIGURE 5: US - PRIVATELY INSURED after ObamaCare PRIVATE PROVIDERS D C E DOCTORS HOSPITALS DRUGS HEALTH PLAN B EMPLOYER INDEMNITY HMOs PPOs Pharmacy Plans No Insurance X X X X

25 SPONSOR CONSUMERS A FIGURE 6: COLOMBIA PRIVATE PROVIDERS C E DOCTORS HOSPITALS DRUGS HEALTH PLAN B GOVERNMENTPrivate EPSs D Public EPSs FOSYGA + CRES + Superintendency

26 SPONSOR = INSURER = HEALTH PLAN = INSTITUTIONAL PROVIDER CONSUMERS A FIGURE 7: CHILE, PUBLIC INSURANCE (LOW INCOME) General GOVT (Ministry of Health) FONASA (National Health Fund) DOCTORS HOSPITALS DRUGS Regional Health Services* E PROVIDERS * Primary care is provided through the regional governments, called municipalities

27 PROVIDERS FFS DRG HIGHER COST LOW/NO COST SPONSOR = INSURER = HEALTH PLAN = INSTITUTIONAL PROVIDER CONSUMERS A FIGURE 8: CHILE, PUBLIC INSURANCE (CONTRIBUTORS) General GOVT (Ministry of Health) FONASA (National Health Fund) INST. DOCTORSINST. HOSPITALS DRUGS Regional Health Services* E PRIVATE DOCTORS PRIVATE HOSPITALS DRUGS * Primary care is provided through the regional governments, called municipalities

28 SPONSOR CONSUMERS A FIGURE 9: CHILE PRIVATELY INSURED PRIVATE PROVIDERS D C E DOCTORS HOSPITALDRUGS REGULAR COVERAGE PRIORITIZED (AUGE) HEALTH PLAN B CLOSED ISAPRES (Integrated HMO ) EMPLOYER OPEN ISAPRES

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30 Table 2: Summary of choices available in various health care systems Alberta Canada 2010 US Medicare 1985 Chile Public 2010 Colombia 2010 US Medicare 2010 a Chile Private 2010 US private employers 2010 a Which choices are available to each agent? Sponsor Choice not to offer insurance? (X) Choice of health plans? (X)XX Choice of benefit features? XXXXX Choice of premium cost sharing? XXXXX Financial reward for reduced coverage? X Choice of premiums varying by income? XXX Choice of premiums for family versus individual coverage? XX Choice of pay-for-performance incentives? XXXX Use of risk adjustment? XXXXX Choice of benefits to offer? XXX(X) Choice of demand side cost sharing to consumers? XXXXX Choice of providers with whom to selectively contract? XXXXX Choice of provider payment? XXXXX Choice of geographic area to serve? XXXX Choice of performance measures to providers? XXXXX Is exclusion of preexisting conditions allowed? XX(X) Is underwriting allowed (denying coverage)? XX(X) Is direct advertising allowed? XXXX Tie-in sales of alternative insurance policies allowed? XX Health Plan

31 Table 2 (continued): Summary of choices available in various health care systems Alberta Canada 2010 US Medicare 1985 Chile Public 2010 Colombia 2010 US Medicare 2010 Chile Private 2010 US private employers 2010 Which choices are available to each agent? Provider Choice of patients when at less than full capacity? XXXXX Choice of balance billing?X c XXXX Is there a primary care gatekeeper? XXXXXX Choice of specialists without a referral? XXXX Choice of different patient waiting times? XXXXXX Can a hospital refuse to treat if no coverage? X Patient sorting across hospitals and doctors? XXXXX Consumers Choice of sponsor? X Choice of whether to be insured?X b X(X) Choice of health plan? XXXX Choice of which family members to insure? X(X) Choice of different benefit feature? XXX Choice of primary care provider? XXXXXXX Choice of specialist? XXXXXXX Simple count of X's Notes: Ratings reflect subjective valuations by the authors. a Items appearing in parentheses are addressed by the 2010 Health Reform, although not necessarily eliminated. b Choosing not to be insured is illegal, but there is an enforcement problem c Limited by fee schedule

32 Health plans

33 Table 3 (continued): Summary of techniques available that influence selection in different health care systems Alberta Canada 2010 US Medicare 1985 Chile Public 2010 Colombia 2010 US Medicare 2010 a Chile Private 2010 US private employers 2010 a Which techniques are available to increase or reduce selection? Sponsor Risk adjustment (bundled payment, set up ex ante) XXX Risk sharing (ex post) XX Report cards and consumer information XXX Benefit plan feature variation XX Premium cost sharing (how premium contributions vary across consumers) X(X) Premium variation by income X X(X) Definition of family for family coverage X?X(X) Premium rate restrictions (rate bands, ceilings, or rates of increase) XXX(X) Supplementary insurance features. XXXXXXX Ease of referrals XX Selective contracting in geographic areas with low cost populations X(X) X c X Simple count of X's Notes: a Items appearing in parentheses are addressed by the 2010 Health Reform, although not necessarily eliminated. b Choosing not to be insured is illegal, but there is an enforcement problem c Urban vs rural, based more on private doctor avalability than low risk charateristics

34 Table 4: Summary of problems, choices, and selection technigues in different health care systems Alberta Canada 2010 US Medicare 1985 Chile Public 2010 Colombia 2010 US Medicare 2010 a Chile Private 2010 US private employers 2010 a Which selection techniques available? c a Items appearing in parentheses are addressed by the 2010 Health Reform, although not necessarily eliminated. b Choosing not to be insured is illegal, but there is an enforcement problem c Urban vs rural, based more on private doctor avalability than low risk charateristics What Choices are available? What problems are there?

35 Key findings from comparisons Countries vary in the choices, problems, and selection tools available Objectives vary: Canada values income and risk solidarity much more than US; Chile and Colombia are in between Service selection problems arise where there is a selective contracting or pricing with providers (US, Chile, Colombia) Sponsorship by employers leads to more selection problems than sponsorship by a government entity Risk adjustment and risk sharing are relevant at many different levels of the health care system. Regulations are as important as financial incentives. Paper says nothing about cost and quality efficiency.


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