Skip to main content

Does service-level spending show evidence of selection across health plan types?

Buy Article:

$55.00 plus tax (Refund Policy)


We provide an explanation for the widespread finding that capitated managed care plans attract comparatively healthy, low cost enrollees relative to traditional unmanaged plans. Using disaggregated commercial insurance claims from the Thomson-Reuters MarketScan database, we show that managed care plans spend proportionally less on those types of services that are predicted to be more profitable to ration tightly using a selection index developed by Ellis and McGuire that captures the derivative of profits with respect to reduced spending on disaggregated services. Conventional diagnosis-based risk adjusted premiums reduce selection incentives by about 50% relative to premiums that are not risk-adjusted.

Keywords: C21; D12; I11; health care spending; health insurance; managed care; risk adjustment; selection

Document Type: Research Article


Affiliations: 1: Department of Economics,Boston University, 270 Bay State RoadBoston 02215, USA 2: Hanqing Advanced Institute of Economics and Finance, School of Finance, Renmin University of China, Beijing, China 3: Research Department,Verisk Health, Inc, Waltham, USA

Publication date: 2013-05-01

More about this publication?
  • Access Key
  • Free content
  • Partial Free content
  • New content
  • Open access content
  • Partial Open access content
  • Subscribed content
  • Partial Subscribed content
  • Free trial content
Cookie Policy
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more