Scope and Incentives for Risk Selection in Health Insurance Markets With Regulated Competition: A Conceptual Framework and International Comparison.

In health insurance markets with regulated competition, regulators face the challenge of preventing risk selection. This paper provides a framework for analyzing the scope (i.e., potential actions by insurers and consumers) and incentives for risk selection in such markets. Our approach consists of three steps. First, we describe four types of risk selection: (a) selection by consumers in and out of the market, (b) selection by consumers between high- and low-value plans, (c) selection by insurers via plan design, and (d) selection by insurers via other channels such as marketing, customer service, and supplementary insurance. In a second step, we develop a conceptual framework of how regulation and features of health insurance markets affect the scope and incentives for risk selection along these four dimensions. In a third step, we use this framework to compare nine health insurance markets with regulated competition in Australia, Europe, Israel, and the United States.

Do we care about high-cost patients? Estimating the savings on health spending by integrated care.

A recent integrated health care initiative in Belgium supports 12 regional pilot projects scattered across the country and representing 21% of the population. As in shared savings programs, part of the estimated savings in health spending are paid out to the projects to reinvest in new actions. Short-term savings are expected in particular from cost reductions among high-cost patients. We estimate the effect of the projects on spending using a difference-in-difference model. The sensitivity of the results to the right-skewness of spending is commonly addressed by removing or top-coding high-cost cases. However, this leads to an underestimation of realized savings at the top end of the distribution, therefore, lowering incentives for cost reduction. We show that this trade-off can be weakened by an alternative approach in which cost categories that fall out of the scope of the projects' interventions are excluded from the dependent variable. We find that this approach leads to improvements in precision and model fit that are of the same magnitude as excluding high-cost cases altogether. At the same time, it sharpens the incentives for cost reduction because the model better reflects the costs that projects can affect.

Belgium's response to the COVID-19 pandemic.

Belgium is often seen as an outlier in the international experience with the coronavirus disease 2019. We summarize the unfolding of the pandemic in Belgium from February to December 2020, discuss the countermeasures that were implemented and provide some explanations why the numbers indicate a stronger pandemic in Belgium than in its neighbouring countries. To some extent, the seemingly poor performance of Belgium is a measurement artefact. Yet, there were indeed particular factors in Belgium that unnecessarily increased the toll of the pandemic. In the first wave insufficient priority was given to protect care homes. The second wave was larger than necessary due to a failure to timely implement restrictive measures. The latter can, at least partly, be explained by a unique political situation: a temporary, minority government in the middle of a major crisis.

To be or not to be: Future lives in economic evaluation.

Sometimes healthcare will affect the health of people living in the future, or their chance of coming into existence. Should such outcomes be valued in health-economic evaluation? Guidelines implicitly recommend their inclusion but this rule has counterintuitive implications and is not consistently applied in practice. We suggest making a distinction between "necessary" and "potential" future lives in Health Technology Assessment. Necessary lives will exist independent of our healthcare choices and should be included. Potential lives are choice-dependent and should be excluded. This rule offers intuitive solutions within the HTA framework, and it changes the cost-effectiveness of several interventions where necessary future lives are affected.

Individual Uncertainty About Longevity.

This article presents an assessment of individual uncertainty about longevity. A survey performed on 3,331 French people enables us to record several survival probabilities per individual. On this basis, we compute subjective life expectancies (SLE) and subjective uncertainty regarding longevity (SUL), the standard deviation of each individual's subjective distribution of her or his own longevity. It is large and equal to more than 10 years for men and women. Its magnitude is comparable to the variability of longevity observed in life tables for individuals under 60, but it is smaller for those older than 60, which suggests use of private information by older respondents. Our econometric analysis confirms that individuals use private information-mainly their parents' survival and longevity-to adjust their level of uncertainty. Finally, we find that SUL has a sizable impact, in addition to SLE, on risky behaviors: more uncertainty on longevity significantly decreases the probability of unhealthy lifestyles. Given that individual uncertainty about longevity affects prevention behavior, retirement decisions, and demand for long-term care insurance, these results have important implications for public policy concerning health care and retirement.

Fairness in cost-benefit analysis: A methodology for health technology assessment.

We evaluate the introduction of various forms of antihypertensive treatments in France with a distribution-sensitive cost-benefit analysis. Compared to traditional cost-benefit analysis, we implement distributional weighting based on equivalent incomes, a new concept of individual well-being that does respect individual preferences but is not subjectively welfarist. Individual preferences are estimated on the basis of a contingent valuation question, introduced into a representative survey of the French population. Compared to traditional cost-effectiveness analysis in health technology assessment, we show that it is feasible to go beyond a narrow evaluation of health outcomes while still fully exploiting the sophistication of medical information. Sensitivity analysis illustrates the relevancy of this richer welfare framework, the importance of the distinction between an ex ante and an ex post approach, and the need to consider distributional effects in a broader institutional setting.

Out-of-Pocket Payments and Subjective Unmet Need of Healthcare.

We present a critical review of the literature that discusses the link between the level of out-of-pocket payments in developed countries and the share of people in these countries reporting that they postpone or forgo healthcare for financial reasons. We discuss the pros and cons of measuring access problems with this subjective variable. Whereas the quantitative findings in terms of numbers of people postponing care must be interpreted with utmost caution, the picture for the vulnerable groups in society is reasonably robust and unsurprising: people with low incomes and high morbidity and incomplete (or non-existent) insurance coverage are most likely to postpone or forgo healthcare for financial reasons. It is more surprising that people with high incomes and generous insurance coverage also report that they postpone care. We focus on some policy-relevant issues that call for further research: the subtle interactions between financial and non-financial factors, the possibility of differentiation of out-of-pocket payments between patients and between healthcare services, and the normative debate around accessibility and affordability.

Differing types of medical prevention appeal to different individuals.

We analyze participation in medical prevention with an expected utility model that is sufficiently rich to capture diverging features of different prevention procedures. The predictions of the model are not rejected with data from SHARE. A decrease in individual health decreases participation in breast cancer screening and dental prevention and increases participation in influenza vaccination, cholesterol screening, blood pressure screening, and blood sugar screening. Positive income effects are most pronounced for dental prevention. Increased mortality risk is an important predictor in the model for breast cancer screening, but not for the other procedures. Targeted screening and vaccination programs increase participation.

How to introduce more (or better) ethical arguments in HTA?

All evaluation exercises involve ethical values, as they require some conception of the "good life." Evaluation of health technologies is no exception. Because there is no consensus about what is a good life, we have to devise decision-making procedures in which citizens with different opinions are heard and treated fairly (1). The purpose of health technology assessment (HTA) is to offer useful input into this process so as to increase the quality of the deliberations and of the resulting decisions. How to bring ethical values into this process?

Demand-side strategies to deal with moral hazard in public insurance for long-term care.

Moral hazard in public insurance for long-term care may be counteracted by strategies influencing supply or demand. Demand-side strategies may target the patient or the insurer. Various demand-side strategies and how they are implemented in four European countries (Germany, Belgium, Switzerland and the Netherlands) are described, highlighting the pros and cons of each strategy. Patient-oriented strategies to counteract moral hazard are used in all four countries but their impact on efficiency is unclear and crucially depends on their design. Strategies targeted at insurers are much less popular: Belgium and Switzerland have introduced elements of managed competition for some types of long-term care, as has the Netherlands in 2015. As only some elements of managed competition have been introduced, it is unclear whether it improves efficiency. Its effect will depend on the feasibility of setting appropriate financial incentives for insurers using risk equalization and the willingness of governments to provide insurers with instruments to manage long-term care.

Inequity in the Face of Death.

We apply the theory of inequality of opportunity to the measurement of inequity in mortality. Using a rich data set linking records of mortality and health events to survey data on lifestyles for the Netherlands (1998-2007), we test the sensitivity of estimated inequity to different normative choices and conclude that the location of the responsibility cut is of vital importance. Traditional measures of inequity (such as socioeconomic and regional inequalities) only capture part of more comprehensive notions of unfairness. We show that distinguishing between different routes via which variables might be associated to mortality is essential to the application of different normative positions. Using the fairness gap (direct unfairness), measured inequity according to our implementation of the 'control' and 'preference' approaches ranges between 0.0229 and 0.0239 (0.0102-0.0218), while regional and socioeconomic inequalities are smaller than 0.0020 (0.0001). The usual practice of standardizing for age and gender has large effects on measured inequity. Finally, we use our model to measure inequity in simulated counterfactual situations. While it is a big challenge to identify all causal relationships involved in this empirical context, this does not affect our main conclusions regarding the importance of normative choices in the measurement of inequity. Copyright © 2014 John Wiley & Sons, Ltd.

Preconditions for efficiency and affordability in competitive healthcare markets: are they fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland?

CONTEXT: From the mid-1990s several countries have introduced elements of regulated competition in healthcare. The aim of this paper is to identify the most important preconditions for achieving efficiency and affordability under regulated competition in healthcare, and to indicate to what extent these preconditions are fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland. These experiences can be worthwhile for other countries (considering) implementing regulated competition (e.g. Australia, Czech Republic, Ireland, Russia, Slovakia, US). METHODS: We identify and discuss ten preconditions derived from the theoretical model of regulated competition and assess the extent to which each of these preconditions is fulfilled in Belgium, Germany, Israel, the Netherlands and Switzerland. FINDINGS: After more than a decade of healthcare reforms in none of these countries all preconditions are completely fulfilled. The following preconditions are least fulfilled: consumer information and transparency, contestable markets, freedom to contract and integrate, and competition regulation. The extent to which the preconditions are fulfilled differs substantially across the five countries. Despite substantial progress in the last years in improving the risk equalization systems, insurers are still confronted with substantial incentives for risk selection, in particular in Israel and Switzerland. Imperfect risk adjustment implies that governments are faced with a complex tradeoff between efficiency, affordability and selection. CONCLUSIONS: Implementing regulated competition in healthcare is complex, given the preconditions that have to be fulfilled. Moreover, since not all preconditions can be fulfilled simultaneously, tradeoffs have to be made with implications for the levels of efficiency and affordability that can be achieved. Therefore the optimal set of preconditions is not only an empirical question but ultimately also a matter of societal preferences.

Equivalent income and fair evaluation of health care.

We argue that the economic evaluation of health care (cost-benefit analysis) should respect individual preferences and should incorporate distributional considerations. Relying on individual preferences does not imply subjective welfarism. We propose a particular non-welfarist approach, based on the concept of equivalent income, and show how it helps to define distributional weights. We illustrate the feasibility of our approach with empirical results from a pilot survey.

Reference value sensitivity of measures of unfair health inequality.

Most politicians and ethical observers are not interested in pure health inequalities, as they want to distinguish between different causes of health differences. Measures of "unfair" inequality - direct unfairness and the fairness gap, but also the popular standardized concentration index - therefore neutralize the effects of what are considered to be "legitimate" causes of inequality. This neutralization is performed by putting a subset of the explanatory variables at reference values, e.g. their means. We analyze how the inequality ranking of different policies depends on the specific choice of reference values. We show with mortality data from the Netherlands that the problem is empirically relevant and we suggest a statistical method for fixing the reference values.

Supplemental health insurance and equality of access in Belgium.

The effects of supplemental health insurance on health-care consumption crucially depend on specific institutional features of the health-care system. We analyse the situation in Belgium, a country with a very broad coverage in compulsory social health insurance and where supplemental insurance mainly refers to extra-billing in hospitals. Within this institutional background, we find only weak evidence of adverse selection in the coverage of supplemental health insurance. We find much stronger effects of socio-economic background. We estimate a bivariate probit model and cannot reject the assumption of exogeneity of insurance availability for the explanation of health-care use. A count model for hospital care shows that supplemental insurance has no significant effect on the number of spells, but a negative effect on the number of nights per spell. We comment on the implications of our findings for equality of access to health care in Belgium.

Hospital supplements in Belgium: price variation and regulation.

OBJECTIVES: Although there is a comprehensive public health insurance system in Belgium, out-of-pocket expenditures can be very high, mainly for inpatients. While a large part of the official price is reimbursed, patients are confronted with increased extra billing (supplements). Therefore, the government imposed various restrictions on the amount of supplements to be charged, related to the type of room and the patient's insurance status. We investigate how prices are set and whether the restrictions have been effective. METHODS: We use an administrative dataset of the Belgian sickness funds for the year 2003 with billing data per hospitalisation and hospital characteristics. Boxplots describe the distribution of several categories of supplements. OLS is used to explore the relationship between hospital characteristics and extra billing. RESULTS: There is a large and intransparent variation in extra billing practices among different hospitals. Given the room type, supplements per day are smaller for patients qualifying for protection, confirming that the regulation is applied quite well. However, because of their longer length of stay this does not result in lower supplements per stay for these patients. CONCLUSIONS: Currently the price setting behavior of providers lacks transparency. Protective regulation could be refined by taking into account the longer length of stay of vulnerable groups.

Direct versus indirect standardization in risk adjustment.

Direct and indirect standardization procedures aim at comparing differences in health or in health care expenditures between subgroups of the population after controlling for observable morbidity differences. There is a close analogy between this problem and the issue of risk adjustment in health insurance. Traditional methods of risk adjustment are analogous to indirect standardization. They are equivalent to the so-called conditional egalitarian mechanism in social choice. In general, they do not remove incentives for risk selection, even if the effect of non-morbidity variables is correctly taken into account. A method of risk adjustment based on direct standardization does remove the incentives for risk selection, but at the cost of violating a neutrality condition, stating that insurers should receive the same premium subsidy for all members of the same risk group. Direct standardization is equivalent to the egalitarian-equivalent (or proportional) mechanism in social choice. The conflict between removing incentives for risk selection and neutrality is unavoidable if the health expenditure function is not additively separable in the morbidity and efficiency variables.

Unfair inequalities in health and health care.

Inequalities in health and health care are caused by different factors. Measuring "unfair" inequalities implies that a distinction is introduced between causal variables leading to ethically legitimate inequalities and causal variables leading to ethically illegitimate inequalities. An example of the former could be life-style choices, an example of the latter is social background. We show how to derive measures of unfair inequalities in health and in health care delivery from a structural model of health care and health production: "direct unfairness", linked to the variations in medical expenditures and health in the hypothetical distribution in which all legitimate sources of variation are kept constant; "fairness gap", linked to the differences between the actual distribution and the hypothetical distribution in which all illegitimate sources of variation have been removed. These two approaches are related to the theory of fair allocation. In general they lead to different results. We propose to analyse the resulting distributions with the traditional apparatus of Lorenz curves and inequality measures. We compare our proposal to the more common approach using concentration curves and analyse the relationship with the methods of direct and indirect standardization. We discuss how inequalities in health care can be integrated in an overall evaluation of social inequality.

Health care reform in Belgium.

Curbing the growth of public sector health expenditures has been the proclaimed government objective in Belgium since the 1980s. However, the respect for freedom of choice for patients and for therapeutic freedom for providers has blocked the introduction of microeconomic incentives and quality control. Therefore--with some exceptions, particularly in the hospital sector--policy has consisted mainly of tariff and supply restrictions and increases in co-payments. These measures have not been successful in curbing the growth of expenditures. Moreover, there remains a large variation in medical practices. While the structure of health financing is relatively progressive from an international perspective, socioeconomic and regional inequalities in health persist. The most important challenge is the restructuring of the basic decision-making processes; i.e. a simplification of the bureaucratic procedures and a re-examination of the role of regional authorities and sickness funds.