Development of a risk-adjusted capitation model based on principal inpatient diagnoses in Taiwan.

BACKGROUND AND PURPOSE: Taiwan's National Health Insurance (NHI) program has considered the use of capitation payments to health care providers as a method for control of the rising costs of the system. The establishment of capitation payments usually requires the performance of risk adjustment. The purposes of this study were to develop a diagnosis-based risk adjustment model for the NHI and to evaluate its predictability. METHODS: Using a 2% random sample of 371,620 NHI enrollees, the authors developed a Taiwan version of the Principal Inpatient Diagnosis Cost Groups (TPIPDCGs) from 1996 claim records to predict an individual's expenditure in 1997. Weighted least squares regression models were built in an estimation sample (two-thirds of the study sample), and were cross-validated in a validation sample (the remaining one-third of the study sample). Predictive R2 and predictive ratios were used to evaluate the model's predictability. RESULTS: Only 7.88% of the study sample could be classified into 1 of the 16 TPIPDCGs. Combined with demographic variables, which alone could explain 3.7% of the variation in an individual's future expenditure, the risk adjustment model based on TPIPDCGs could explain 12.2% of expenditure variation. In addition, the finding that the predictive ratios of the TPIPDCG model approximated unity better than those of the demographic model in all subgroups indicates that the capitation payment as predicted by the TPIPDCG model for each subgroup would better correlate to the actual spending. CONCLUSION: Taiwan's risk-adjusted capitation model based on principal inpatient diagnoses has higher predictability on individual's future expenditure than its counterpart in the USA. This finding provides insight into not only the development of Taiwan's diagnosis-based risk adjustment models but also the necessity of modification when applying foreign-developed risk adjustment models to the NHI.

Healthcare utilization patterns and risk adjustment under Taiwan's National Health Insurance system.

BACKGROUND AND PURPOSE: Some recent proposals for reform of Taiwan's National Health Insurance (NHI) system include risk adjustment mechanisms. However, there is a paucity of research on risk adjustment and its utilization in health insurance systems in Taiwan. The purposes of this study were to determine the healthcare utilization pattern and to develop a risk assessment model for capitation payments under NHI. METHODS: The individual enrollment and medical expenditure data for 1996 and 1997 were obtained from the Bureau of NHI. A random sample of 360,037 beneficiaries was divided into two sub-samples: one for model building and one for validation. Linear regression was employed to estimate the relationship between each individual's 1997 total expenditure and risk adjusters, i.e., age, gender, prior years' medical spending, and catastrophic status. RESULTS: The 10- to 14-years age group had the lowest total expenditure of $NT 3,055 ($US 1 = $NT 27.5 in 1996) in 1996, while the 65 years and over age group had the highest at almost 10 times more than the lowest. The distributions of total expenditure for both genders followed the familiar J-shaped curve. The average of the total expenditure of individuals with a catastrophic diagnosis was more than 17 times that of individuals without. Age and gender resulted in a predictive R2 of only 3.8% in the risk assessment model. By including prior total expenditure, the predictive R2 increased to 24.2%. Further addition of catastrophic status increased the predictability slightly to 25%. Prior outpatient expenditure predicted 72% of subsequent outpatient expenditure, but prior inpatient expenditure predicted only 3% of subsequent inpatient expenditure. CONCLUSIONS: As in other countries, age and gender provided only limited predictability in risk assessment. On the other hand, prior outpatient expenditure in this study provided relatively superior predictability in risk assessment. Prudence is required when including prior utilization as a part of the risk assessment model in calculating capitation payments, as this may indirectly encourage unnecessary use of healthcare services.