Unbiased Analysis of Today's Healthcare Issues
The adverse selection death spiral has reared its ugly head again. PacAdvantage, an insurance pooling company for 6000 small and medium sized businesses in California has closed its doors. The Sacramento Business Journal reports (“Backer pulls plug on PacAdvantage health purchasing pool“) that the three remaining insurers underwriting the plan have pulled out. Michael Holt of The…
Many papers on health insurance worry about the problem of adverse selection. Critics of HMOs claim that the fact that HMOs have lower costs is not due to more efficient provision of services nor the limitation of the provision of services, but instead largely caused by the fact that the people who choose to enroll…
In the mid to late 1990s, there was a large backlash against HMOs due to the perception that the “HMO cares more about saving money than it does about them.” People feared that HMO would drop coverage of services which they valued. In this month’s NBER working paper edition, Yu-Chu Shen (2006) looks answer two…
The Cavalcade of Risk #4 is posted. From the C or R website: The purpose of the C of R is to offer insights into the world of risk management; generally, this will be insurance-related, but that’s not a requirement. Our goal is to help folks understand what risk is, and how to manage it.…
How does one design an optimal insurance policy where physicians and patients are compelled to tell the truth about the medical procedures that were completed? This is the question of Ching-To Albert Ma and Thomas McGuire in their 1997 AER paper. The paper is somewhat technical but I will briefly explain their setup and conclusions,…
‘Adverse selection’ and ‘moral hazard’ are phenomenons which affect any analysis of the insurance market. For instance, Cutler and Zeckhauser (1997) speak of an adverse selection ‘death spiral’ which made untenable the continued offering of a generous health insurance benefit at Harvard University. In their NBER paper, Finkelstein and McGarry (2003) attempt to estimate the effect…
According to the Kaiser Family Foundation’s (KFF) 2005 Employer Health Benefits Survey, the estimated number of firms who will offer high deductible health plans has increased to 20% in 2005. This is up from 5% in 2003 and 10% in 2004. Despite this increase, only 3.9% of workers–about 2.4 million in total–are covered either by a…
Forbes reported last week (“Millions…“) that millions of dollars are wasted each year due to unnecessary tests. Their findings are based on an article by Dr. Dan Merenstein and co-authors and is to appear in the June issue of the American Journal of Preventive Medicine. What is the definition of an unnecessary test? The United…
One of the major reasons why President Bushâs plan for Health Savings Accounts (HSA) required that participants use high-deductible health plans (HDHP) was to lessen the incidence of moral hazard. When an individual is insured against medical expenses, they are not liable for the full cost of medical services and thus are more prone to…
“One of the quirks of the health care system is that health plans individually negotiate different prices with hospitals and doctors. The result is that two health plans can pay different prices for the same procedure at the same hospital. The contracts typically prevent a health plan from saying that it charges a certain amount…