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Extreme under and overcompensation in morbidity-based health plan payments: The case of Switzerland

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  • Kauer, Lukas
  • McGuire, Thomas G.
  • Beck, Konstantin

Abstract

In 2020, the Swiss insurer payment model will include a set of sophisticated morbidity indicators in the form of Pharmaceutical Cost Groups (PCGs), added to a payment model currently largely based on age, gender, and a crude morbidity indicator. Adding powerful risk adjustors reduces underpayment for previously highly underpaid groups but creates a new group of the highly overpaid. We characterize the diseases and patterns of health care spending in most extremely under and overpaid in the new Swiss payment model. We define extremely under and overpaid to be those in the top and bottom 1 and .1 percentiles of the distribution of spending less payment, respectively. The under and overpaid share some of the same health conditions, among them kidney disease. The highly underpaid account for a massively disproportionate share of the unexplained variance in the new payment model. Membership in the tails of the distribution of spending residuals after risk adjustment is persistent, implying that the highly over and underpaid merit special attention in design of insurer payment models.

Suggested Citation

  • Kauer, Lukas & McGuire, Thomas G. & Beck, Konstantin, 2020. "Extreme under and overcompensation in morbidity-based health plan payments: The case of Switzerland," Health Policy, Elsevier, vol. 124(1), pages 61-68.
    • Handle: RePEc:eee:hepoli:v:124:y:2020:i:1:p:61-68
    DOI: 10.1016/j.healthpol.2019.11.008
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    Cited by:

    1. Tuukka Holster & Shaoxiong Ji & Pekka Marttinen, 2024. "Risk adjustment for regional healthcare funding allocations with ensemble methods: an empirical study and interpretation," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 25(7), pages 1117-1131, September.
    2. Beck, Konstantin & Kauer, Lukas & McGuire, Thomas G. & Schmid, Christian P.R., 2020. "Improving risk-equalization in Switzerland: Effects of alternative reform proposals on reallocating public subsidies for hospitals," Health Policy, Elsevier, vol. 124(12), pages 1363-1367.
    3. Thomas G. McGuire & Sonja Schillo & Richard C. Kleef, 2021. "Very high and low residual spenders in private health insurance markets: Germany, The Netherlands and the U.S. Marketplaces," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(1), pages 35-50, February.

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    More about this item

    Keywords

    Health insurance; Risk adjustment; Risk equalization; Risk selection; Payment fit;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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