Erik Schokkaert

Risk adjustment and risk selection on the sickness fund insurance market in five European countries

From the mid-1990s citizens in Belgium, Germany, Israel, the Netherlands and Switzerland have a guaranteed periodic choice among risk-bearing sickness funds, who are responsible for purchasing their care or providing them with medical care. The rationale of this arrangement is to stimulate the sickness funds to improve efficiency in health care production and to respond to consumers preferences. To achieve solidarity, all five countries have implemented a system of risk-adjusted premium subsidies (or risk equalization across risk groups), along with strict regulation of the consumers direct premium contribution to their sickness fund. In this article we present a conceptual framework for understanding risk adjustment and comparing the systems in the five countries. We conclude that in the case of imperfect risk adjustment-as is the case in all five countries in the year 2001-the sickness funds have financial incentives for risk selection, which may threaten solidarity, efficiency, quality of care and consumer satisfaction. We expect that without substantial improvements in the risk adjustment formulae, risk selection will increase in all five countries. The issue is particularly serious in Germany and Switzerland. We strongly recommend therefore that policy makers in the five countries give top priority to the improvement of the system of risk adjustment. That would enhance solidarity, cost-control, efficiency and client satisfaction in a system of competing, risk-bearing sickness funds.

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

CONTEXTnFrom 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).nnnMETHODSnWe 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.nnnFINDINGSnAfter 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.nnnCONCLUSIONSnImplementing 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.

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.