The new risk adjustment formula in Germany: Implementation and first experiences
Introduction
Germany's social health insurance system is built on competing non-profit public health insurers called “sickness funds”. Risk adjustment between these funds (Risikostrukturausgleich; RSA) is a core element of the regulatory framework in order to create a level playing field. Originally, RSA was based mainly on basic socio-demographic factors. But these have been identified as being insufficient to discourage risk selection by sickness funds [1], [2]. Accordingly, morbidity – as measured by recorded diagnoses and prescriptions – was introduced as an additional set of risk adjusters coming into effect in 2009. The new formula was established within a broader reform of financing social health insurance [3].
In this paper we focus on first experiences with the new risk adjustment scheme: How well does it perform in comparison to the old model? Did it achieve the goals policy makers had? What are its strengths, what its weaknesses? Therefore, in Section 4 we present results based on an evaluation commissioned end of 2010 by the Federal Ministry of Health to the Advisory Board of Scientific Experts on Risk Adjustment. Before, we describe the changing framework of financing social health insurance in Germany, in which the new risk adjustment model is embedded (Section 2) and we present the new risk adjustment model in more detail (in Section 3). The paper finishes with a discussion and conclusions (Section 5).
Section snippets
The changing framework of financing social health insurance in Germany
Almost 90% of the population have their primary coverage with one of the 135 competing “sickness funds” (status 2012), non-profit organizations incorporated under public law. A substitutive private health insurance system exists for the remaining 10% of the population, which is beyond the scope of this paper, as it does not take in part in risk adjustment [4]. Since 1996 virtually every member of the sickness funds system can switch regularly (open enrolment). There is a minimum retention
Selection of 80 diseases
According to law, the selected 50–80 diseases have to be either “severe” or “costly and chronic”. For each selected disease, average per capita expenditure of the concerned in the year following the diagnosis has to exceed 1.5 times the average per capita expenditure of all insured (cost threshold).
The selection process was proposed by an Advisory Board of Scientific Experts on Risk Adjustment [13] and modified by the Federal Insurance Office in some essential points. For the empirical analysis
First experiences of the new risk adjustment mechanism
The results of the final settlement for 2009 have been subject to an evaluation by the Advisory Board of Scientific Experts on Risk Adjustment [17]. The main result was: accuracy of payments has significantly improved compared to the prior risk adjustment scheme, but some problems remain.
Discussion and conclusions
This paper reports on the reform of risk adjustment in the German social health insurance system: In 2009 a set of morbidity-based risk adjusters for 80 diseases was added to the pre-existing demographic risk adjusters. At the same time, DMP enrolment was deleted as risk adjuster, and the retrospective high-cost pool was abolished.
The main goal of improving risk adjustment was to establish a level playing field for the competing sickness funds: Their financial position should not depend on
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Cited by (54)
The relation between selective contracting and healthcare expenditures in private health insurance plans in the United States
2020, Health PolicyCitation Excerpt :However, it remains unclear if cost savings result from price variation and the Dutch government also imposes strict spending limits on hospitals. In Germany, managed competition is used, but bargaining between insurers and providers is limited, although there is debate about whether to relax the strong fee regulation by the central government [4]. Similarly, Switzerland introduced a version of managed competition where the insurance markets are strongly decentralized at the canton-level, but selective contracting is still not allowed, largely because of equity concerns [5].
References for Part I
2018, Risk Adjustment, Risk Sharing and Premium Regulation in Health Insurance Markets: Theory and PracticeHealth plan payment in Chile
2018, Risk Adjustment, Risk Sharing and Premium Regulation in Health Insurance Markets: Theory and PracticeHealth plan payment in Germany
2018, Risk Adjustment, Risk Sharing and Premium Regulation in Health Insurance Markets: Theory and PracticePlan responses to diagnosis-based payment: Evidence from Germany's morbidity-based risk adjustment
2017, Journal of Health EconomicsCitation Excerpt :Plans are also responsive to the payment formula, as evidenced by their responses to temporary subsidies for disease management programs in the early 2000 s (e.g., Brandt, 2008) and to incentives to exploit geographic variation in risk (Bauhoff, 2012). The SHI introduced a RA system in 1994 in advance of allowing consumers free choice of health plans in 1996 (Buchner et al., 2013). The initial payment formula was based on age, sex, and disability-to-work-status as risk adjustors.