Public payers often use payment mechanisms as a way to improve the efficiency of the healthcare system. One source of inefficiency is service distortion (SD) in which health plans over/underprovide services in order to affect the mix of their enrollees. Using Israeli data, we apply a new measure of SD to show that a mixed payment scheme, with a modest level of cost-sharing, yields a significant improvement over a pure risk-adjustment scheme. This observation implies that even though mixed systems induce overprovision of some services, their benefits far outweigh their costs.
Bibliographical notePublisher Copyright:
© 2019, Springer-Verlag GmbH Germany, part of Springer Nature.
- Adverse selection
- Managed care
- Managed competition
- Payment mechanisms
- Service distortion