Predictability and Predictiveness in Health Care Spending

Randall Ellis and Thomas McGuire
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Thomas McGuire: Harvard University

No WP2006-001, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: This paper re-examines the relation between the predictability of health care spending and incentives due to adverse selection. Within an explicit model of health plan decisions about service levels, we show that predictability (how well spending on certain services can be anticipated), predictiveness (how well the predicted levels of certain services contemporaneously co-vary with total health care spending), and demand responsiveness all matter for adverse selection incentives. The product of terms involving these three measures of predictability, predictiveness, and demand responsiveness define an empirical index of the direction and magnitude of selection incentives. We quantify the relative magnitude of adverse selection incentives bearing on various types of health care services in Medicare. Our results are consistent with other research on service-level selection. The index of incentives can readily be applied to data from other payers.

Keywords: Health Plans; Adverse Selection; Medicare; Managed Care. (search for similar items in EconPapers)
Pages: 38pages
Date: 2006-01
New Economics Papers: this item is included in nep-hea and nep-ias
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Citations: View citations in EconPapers (2)

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Journal Article: Predictability and predictiveness in health care spending (2007)
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