Abstract：
:Direct and indirect standardization procedures aim at comparing differences in health or in health care expenditures between subgroups of the population after controlling for observable morbidity differences. There is a close analogy between this problem and the issue of risk adjustment in health insurance. Traditional methods of risk adjustment are analogous to indirect standardization. They are equivalent to the so-called conditional egalitarian mechanism in social choice. In general, they do not remove incentives for risk selection, even if the effect of non-morbidity variables is correctly taken into account. A method of risk adjustment based on direct standardization does remove the incentives for risk selection, but at the cost of violating a neutrality condition, stating that insurers should receive the same premium subsidy for all members of the same risk group. Direct standardization is equivalent to the egalitarian-equivalent (or proportional) mechanism in social choice. The conflict between removing incentives for risk selection and neutrality is unavoidable if the health expenditure function is not additively separable in the morbidity and efficiency variables.
journal_name
J Health Econjournal_title
Journal of health economicsauthors
Schokkaert E,Van de Voorde Cdoi
10.1016/j.jhealeco.2008.10.012subject
Has Abstractpub_date
2009-03-01 00:00:00pages
361-74issue
2eissn
0167-6296issn
1879-1646pii
S0167-6296(08)00157-4journal_volume
28pub_type
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