Risk adjustment for a children's capitation rate
Newhouse, J.P.; Sloss, E.M.; Manning, W.G.; Keeler, E.B.
Health Care Financing Review 15(1): 39-54
1993
ISSN/ISBN: 0195-8631 PMID: 10133708 Document Number: 414095
Few capitation arrangements vary premiums by a child's health characteristics, yielding an incentive to discriminate against children with predictably high expenditures from chronic diseases. In this article, we explore risk adjusters for the 35 percent of the variance in annual out-patient expenditure we find to be potentially predictable. Demographic factors such as age and gender only explain 5 percent of such variance; health status measures explain 25 percent, prior use and health status measures together explain 65 to 70 percent. The profit from risk selection falls less than proportionately with improved ability to adjust for risk. Partial capitation rates may be necessary to mitigate skimming and dumping.