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Many community-rated health insurance markets include risk equalization (also known as risk adjustment) to mitigate risk selection incentives for competing insurers. Empirical evaluations of risk equalization typically quantify selection incentives through predictable profits and losses net of risk equalization for various groups of consumers (e.g. the healthy versus the chronically ill). The underlying assumption is that absence of predictable profits and losses implies absence of selection incentives. This paper questions this assumption. We show that even when risk equalization perfectly compensates insurers for predictable differences in mean spending between groups, selection incentives are likely to remain. The reason is that the uncertainty about residual spending (i.e., spending net of risk equalization) differs across groups, e.g., the risk of substantial losses is larger for the chronically ill than for the healthy. In a risk-rated market, insurers are likely to charge a higher profit mark-up (to cover uncertainty in residual spending) and a higher safety mark-up (to cover the risk of large losses) to chronically ill than to healthy individuals. When such differentiation is not allowed, insurers face incentives to select in favor of the healthy. Although the exact size of these selection incentives depends on contextual factors, our empirical simulations indicate they can be non-trivial. Our findings suggest that - in addition to the equalization of differences in mean spending between the healthy and the chronically ill - policy measures might be needed to diminish (or compensate insurers for) heteroscedasticity of residual spending across groups., (© 2023. The Author(s).)

An important condition for optimal health insurance is that the level of health care coverage is inversely related to the elasticity of demand. We show that this condition is not satisfied for voluntary deductibles in the Netherlands, which are optional deductibles on top of the mandatory deductible introduced by the Dutch government. We find that low-risk types, that mainly choose voluntary deductibles, have a lower elasticity of demand than high-risk types. Moreover, we show that voluntary deductibles introduce equity problems as it results in non-trivial cross subsidies from high-risk to low-risk types. Capping the level of voluntary deductibles (imposing minimum generosity) is likely to be welfare enhancing in the Netherlands., Competing Interests: Declaration of Competing Interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2023 The Authors. Published by Elsevier B.V. All rights reserved.)

In many countries, governments use payment systems to compensate health insurers more for enrollees with higher expected costs. However, little empirical research has examined whether these payment systems should also include health insurers' administrative costs. We provide two sources of evidence that health insurers with a more morbid population have higher administrative costs. First, we show at the customer level a causal relationship between individual morbidity and individual administrative contacts with the insurer, using the weekly evolution of the number of individual customer contacts (calls, emails, in-person visits etc.) of a large Swiss health insurer. Using a difference-in-differences design, we find that the onset of a chronic illness causes on average a persistent increase of about 40% in individuals' contacts with the health insurer. Second, we provide evidence that this relationship also holds for total administrative costs at the insurer level. We study twenty years of Swiss health insurance market data and find a positive elasticity of around 1, indicating that, all else equal, an insurer with a more morbid population, equal to 1% more health care spending, faces about 1% higher administrative costs., Competing Interests: Declaration of competing interest None., (Copyright © 2023 The Authors. Published by Elsevier Ltd.. All rights reserved.)

Most countries that apply risk-equalization in their health insurance market(s) perform risk-equalization on medical claims but do not include other components of the insurance premium, such as administrative costs. Using fixed effects panel regressions from individual insurers in Australia, Germany, the Netherlands, Switzerland, and the US, we find evidence that health insurers with a high morbidity population on average have higher administrative costs. We argue that administrative costs should also be included in risk-equalization and we show that such equalization results in additional equalization payments nontrivial in size. Using examples from Germany and the US, we show how in practice policymakers can include administrative costs in risk-equalization. We are skeptical about applying risk-equalization to other components of the insurance premium, such as profits or costs related to solvency requirements of insurers., (© 2022. The Author(s).)

We study whether two groups of mental health care providers-each paid according to a different payment scheme-adjusted the duration of their patients' treatments after they faced an exogenous 20% drop in the number of patients. For the first group of providers, self-employed providers, we find that they did not increase treatment duration to recoup their income loss. Treatment duration thresholds in the stepwise fee-for-service payment function seem to have prevented these providers to treat patients longer. For the second group of providers, large mental health care institutions who were subject to a budget constraint, we find an average increase in treatment duration of 8%. Prior rationing combined with professional uncertainty can explain this increase. We find suggestive evidence for overtreatment of patients as the longer treatments did not result in better patient outcomes, i.e. better General Assessment of Functioning scores., (© 2021 The Authors. Health Economics published by John Wiley & Sons Ltd.)

In the Dutch health care system of managed competition, insurers and mental health providers negotiate on prices for mental health services. Contract prices are capped by a regulator who sets a maximum price for each mental health service. In 2013, the majority of the contract prices equaled these maximum prices. We study price setting after a major policy change in 2014. In 2014, mental health care providers had to negotiate prices with each individual health insurer separately, instead of with all insurers collectively as in 2013. Moreover, after a cost-price revision, the regulator increased in 2014 maximum prices by about 10%. Insurers and mental health providers reacted to this policy change by setting most contract prices below the new maximum prices. We find that in 2014 mental health providers with more market power, that is, a higher willingness-to-pay measure, contracted significantly higher prices. Some insurers negotiated significantly lower prices than other insurers but these differences are unrelated to an insurers' market share., (© 2021 The Authors. Health Economics published by John Wiley & Sons Ltd.)

In health care the assessment of patients' needs is typically entrusted to health care providers. By contrast, in publicly financed long-term care (LTC) needs assessment is often delegated to an independent assessor. One rationale offered for independent needs assessment in LTC is to limit the scope for moral hazard and supplier-induced demand, which may be particularly strong in case of public LTC insurance. We study whether independent needs assessment restricts use of publicly financed LTC at the intensive margin (i.e. after people are being assessed to be eligible for receiving care). Therefore, we link nationwide Dutch administrative datasets about individual LTC use and eligibility decisions by the independent assessment agency in 2012. We find for virtually all types of care, all population subgroups, and all regions that LTC use by patients was substantially less than the maximum amount of care allowed by the independent assessor. This suggests that in the Netherlands independent needs assessment in LTC does not impose a binding constraint on use once a person is considered eligible for care. Still, independent needs assessment may have reduced LTC use at the extensive margin. A significant proportion of the applications for care (16 %) was rejected. In addition, the independent assessment may deter some people from applying., Competing Interests: Declaration of competing interest Part of the research was done while Pieter Bakx performed contract research for the CPB. Pieter Bakx and Erik Schut acknowledge support through the NETSPAR grant on “Optimal saving and insurance for old age: the role of public long-term care insurance”. These funding sources were not involved in the research., (Copyright © 2020 The Author(s). Published by Elsevier B.V. All rights reserved.)

In the Dutch health care system, health insurers negotiate with hospitals about the pricing of hospital products in a managed competition framework. In this paper, we study these contract prices that became for the first time publicly available in 2016. The data show substantive price variation between hospitals for the same products, and within a hospital for the same product across insurers. About 27% of the contract prices for a hospital product are at least 20% higher or lower than the average contract price in the market. For about half of the products, the highest and the lowest contract prices across hospitals differ by a factor of three or more. Moreover, hospital product prices do not follow a consistent ranking across hospitals, suggesting substantial cross-subsidization between hospital products. Potential explanations for the large and seemingly random price variation are: (i) different cost pricing methods used by hospitals, (ii) uncertainty due to frequent changes in the hospital payment system, (iii) price adjustments related to negotiated lumpsum payments and (iv) differences in hospital and insurer market power. Several policy options are discussed to reduce variation and increase transparency of hospital prices.

We examine the impact of the accessibility of an older individual's house on her use of nursing home care. We link administrative data on the accessibility of all houses in the Netherlands to data on long-term care use of all older persons from 2011 to 2014. We find that older people living in more accessible houses are less likely to use nursing home care. The effects increase with age and are largest for individuals aged 90 or older. The effects are stronger for people with physical limitations than for persons with cognitive problems. We also provide suggestive evidence that older people living in more accessible houses substitute nursing home care by home care., (© 2020 The Authors. Health Economics published by John Wiley & Sons Ltd.)

Many countries have cost sharing schemes in health insurance to control health care expenditures. The Dutch basic health insurance includes a mandatory deductible of currently 385 euros per adult per year. To avoid affordability problems, several municipalities offer a group contract for low-income people in which the mandatory deductible is 'reinsured'. More specifically, this means that out-of-pocket spending under the deductible is covered by supplementary insurance. By comparing groups with and without the reinsurance option, this study examines whether low-income people are price-sensitive when it comes to pharmaceutical spending. We use a unique dataset from a Dutch health insurer with anonymized individual insurance claims for the period 2014-2017. The data allows for a clean difference-in-difference analysis as it contains both municipalities without reinsurance and municipalities that introduced reinsurance on January 1st 2017. We find that the introduction of reinsurance led to a statistically significant increase in pharmaceutical spending of 16% in the first quarter of 2017 and 7% in the second quarter. For the second half of 2017 the effect is small and not statistically significant. This study adds to the evidence that low-income people are indeed price-sensitive when it comes to pharmaceutical spending., (Copyright © 2019 Elsevier B.V. All rights reserved.)

We assess the relative importance of demand and supply factors as determinants of regional variation in healthcare expenditures in the Netherlands. Our empirical approach follows individuals who migrate between regions. We use individual data on annual healthcare expenditures for the entire Dutch population between the years 2006 and 2013. Regional variation in healthcare expenditures is mostly driven by demand factors, with an estimated share of around 70%. The relative importance of different causes varies with the groups of regions being compared., (© 2019 The Authors Health Economics Published by John Wiley & Sons Ltd.)

In this paper we estimate health plan price elasticities and financial switching gains for consumers over a 20-year period in which managed competition was introduced in the Dutch health insurance market. The period is characterized by a major health insurance reform in 2006 to provide health insurers with more incentives and tools to compete, and to provide consumers with a more differentiated choice of products. Prior to the reform, in the period 1995-2005, we find a low number of switchers, between 2 and 4% a year, modest average total switching gains of 2 million euros per year and short-term health plan price elasticities ranging from -0.1 to -0.4. The major reform in 2006 resulted in an all-time high switching rate of 18%, total switching gains of 130 million euros, and a high short-term price elasticity of -5.7. During 2007-2015 switching rates returned to lower levels, between 4 and 8% per year, with total switching gains in the order of 40 million euros per year on average. Total switching gains could have been 10 times higher if all consumers had switched to one of the cheapest plans. We find short-term price elasticities ranging between -0.9 and -2.2. Our estimations suggest substantial consumer inertia throughout the entire period, as we find degrees of choice persistence ranging from about 0.8 to 0.9.

We evaluate the introduction of a reimbursement schedule for self-employed mental health care providers in the Netherlands in 2008. The reimbursement schedule follows a discontinuous discrete step function-once the provider has passed a treatment duration threshold the fee is flat until a next threshold is reached. We use administrative mental health care data of the total Dutch population from 2008 to 2010. We find an "efficiency" effect: on the flat part of the fee schedule providers reduce treatment duration by 2 to 7% compared to a control group. However, we also find unintended effects: providers treat patients longer to reach a next threshold and obtain a higher fee. The data shows gaps and bunches in the distribution function of treatment durations, just before and after a threshold. About 11 to 13% of treatments are shifted over a next threshold, resulting in a cost increase of approximately 7 to 9%., (Copyright © 2015 Elsevier B.V. All rights reserved.)

We study medical practice variations for nine hospital treatments in the Netherlands. Our panel data estimations include various control factors and physician's role to explain hospital treatments in about 3,000 Dutch zip code regions over the period 2006-2009. In particular, we exploit the physicians' remuneration difference-fee-for-service (FFS) versus salary-to explain the effect of financial incentives on medical production. We find that utilization rates are higher in geographical areas where more patients are treated by physicians that are paid FFS. This effect is strong for supply sensitive treatments, such as cataracts and tonsillectomies, while we do not find an effect for non-supply sensitive treatments, such as hip fractures.

One goal of the Medicare Shared Savings Program for accountable care organizations (ACOs) is to reduce Medicare spending for ACOs' patients relative to the organizations' spending history. However, we found that current rules for setting ACO spending targets (or benchmarks) diminish ACOs' incentives to generate savings and may even encourage higher instead of lower Medicare spending. Spending in the three years before ACOs enter or renew a contract is weighted unequally in the benchmark calculation, with a high weight of 0.6 given to the year just before a new contract starts. Thus, ACOs have incentives to increase spending in that year to inflate their benchmark for future years and thereby make it easier to obtain shared savings from Medicare in the new contract period. We suggest strategies to improve incentives for ACOs, including changes to the weights used to determine benchmarks and new payment models that base an ACO's spending target not only on its own past performance but also on the performance of other ACOs or Medicare providers., (Project HOPE—The People-to-People Health Foundation, Inc.)

Aim: To estimate the price sensitivity of consumer choice of health insurance firm., Method: Using paneldata of the flows of insured between pairs of Dutch sickness funds during the period 1993-2002, we estimate the sensitivity of these flows to differences in insurance premium., Results: The price elasticity of residual demand for health insurance was low during the period 1993-2002, confirming earlier findings based on annual changes in market share. We find small but significant elasticities for basic insurance but insignificant elasticities for supplementary insurance. Young enrollees are more price sensitive than older enrollees., Conclusion: Competition was weak in the market for health insurance during the period under study. For the market-based reforms that are currently under way, this implies that measures to promote competition in the health insurance industry may be needed.

The aim of this paper is to empirically analyse the responses by general practitioners to promotional activities for ethical drugs by pharmaceutical companies. Promotion can be beneficial as a means of providing information, but it can also be harmful in the sense that it lowers price sensitivity of doctors and it merely is a means of maintaining market share, even when cheaper, therapeutically equivalent drugs are available. A model is estimated that includes interactions of promotion expenditures and prices and that explicitly exploits the panel structure of the data, allowing for drug specific effects and dynamic adjustments, or habit persistence. The data used are aggregate monthly GP prescriptions per drug together with monthly outlays on drug promotion for the period 1994-1999 for 11 therapeutic markets, covering more than half of the total prescription drug market in the Netherlands. Identification of price effects is aided by the introduction of the Pharmaceutical Prices Act, which established that Dutch drugs prices became a weighted average of the prices in surrounding countries after June 1996. We conclude that GP drug price sensitivity is small, but adversely affected by promotion. Ltd., (Copyright (c) 2005 John Wiley & Sons, Ltd.)