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

Author

Listed:
  • Shuli Brammli-Greenberg

    (Myers-JDC Brookdale Institute and The Hebrew University)

  • Jacob Glazer

    (Tel Aviv University)

  • Ruth Waitzberg

    (Myers-JDC Brookdale Institute, Ben-Gurion University
    Technische Universität in Berlin)

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.

Suggested Citation

  • Shuli Brammli-Greenberg & Jacob Glazer & Ruth Waitzberg, 2019. "Modest risk-sharing significantly reduces health plans’ incentives for service distortion," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(9), pages 1359-1374, December.
    • Handle: RePEc:spr:eujhec:v:20:y:2019:i:9:d:10.1007_s10198-019-01102-w
    DOI: 10.1007/s10198-019-01102-w
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    More about this item

    Keywords

    Service distortion; Adverse selection; Capitation; Payment mechanisms; Risk-adjustment; Risk-sharing; Managed care; Managed competition;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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