Assignment 3

Question 1

Although not equally as effective, three factors typically used to predict the use of health services are

Answer 1

• an individual’s demographic, (poor)
• health status (between)
• prior utilization. (best)

Question 2

Three key points emerge from the process of risk adjustment

Answer 2

1. even the most complete set of measures explains only a small proportion of the variance in an individual’s use of health services.
2. some sets of measures are better predictors of health services use than are others
3. statistical modeling has its limits.

Question 3

The objective was to examine the effects of insurance copayment arrangements on expenditures with the hope of improving the AAPCC model used by Medicare

Answer 3

the RAND Health Insurance Experiment

Question 4

Relative to other approaches, _____has substantially greater explanatory power. This result probably explains the reason health insurers tend to focus on prior claims experience when setting insurance premiums.

Answer 4

prior utilization

Question 5

The ten principles in Medicare’s risk adjustment approach are:

Answer 5

• (1) The health status-related measures should be clinically meaningful.
• (2) The measures should predict both current and future medical expenditures.
• (3)The measures should be based on large enough sample sizes that they yield accurate and stable predictions.
• (4) Related clinical conditions should be treated hierarchically,
• (5) Vague measures should be grouped with low-paying diagnoses to encourage specific coding of health conditions.
• (6) The measures should not encourage multiple reporting of the same or closely related diagnoses.
• (7) Providers should not be penalized for reporting many conditions.
• (8) Transitivity must hold.
• (9) All of the diagnoses that clinicians use have to map into the payment system.
• (10) Discretionary diagnostic codes should be excluded to prevent intentional or unintentional gaming of the system.

Question 6

A base rate (the average annual Medicare cost) for a particular county is multiplied by factors associated with the member’s demographics and also with the member’s medical diagnoses (HCCs).

This figure is the local benchmark number with which the bids of Medicare Advantage plans are compared.

Answer 6

medicare Advantage payment

Question 7

Which three provisions of the AcA aim to address concerns over possible substantial differences in claims experience across insurers leading to premium volatility?

Answer 7

• risk adjustment
• reinsurance
• risk corridors

Question 8

Why does the AcA’s guaranteed availability of insurance raise concerns of adverse selection?

Answer 8

consumers who are most in need of health care may be more likely to purchase insurance.

Question 9

occurs when insurers have an incentive to avoid enrolling people who are in worse health and likely to require costly medical care.

Answer 9

Risk selection

Question 10

Redistributes funds from plans with lower risk enrollees to plans with higher risk enrollees. The goal is to encourage insurers to compete based on the value and efficiency of their plans rather than by attracting healthier enrollees.

Answer 10

Risk adjustment program:

Question 11

Provides payment to plans that enroll higher cost individuals. This temporary program aims to reduce the incentive for insurers to charge higher premiums due to new market reforms that guarantee the availability of coverage regardless of health status.

Answer 11

Reinsurance program:

Question 12

Limits losses and gains beyond an allowable range. This temporary federal program aims to cushion insurers participating in exchanges and marketplaces from extreme gains and losses.

Answer 12

Risk corridors program:

Question 13

What entities participate in the following programs?

(a) Risk adjustment program:
(b) Reinsurance program:
(c) Risk corridors program:

Answer 13

• Nongrandfathered individual and small group market plans, both inside and outside of the exchanges
• All health insurance issuers and self-insured plans contribute funds; individual market plans subject to new market rules (both inside and outside the exchange) are eligible for payment
• qualified health plans (QHPs), which are plans qualified to be offered on a health insurance marketplace (also called an exchange)

Question 14

How is government oversight achieved under the following programs?

(a) Risk adjustment program:
(b) Reinsurance program:
(c) Risk corridors program:

Answer 14

• The Department of Health and Human Services (HHS) developed a federally certified risk adjustment methodology to be used by states or by HHS on behalf of states
• States have the option to operate their own reinsurance program or allow HHS to run one for the state.
• The risk corridor program is federally administered.

Question 15

What is the methodology used by HHS under its risk adjustment program to determine individual risk scores? (3)

Answer 15

individual risk scores—based on each individual’s

• age
• gender
• diagnoses

Question 16

weighted average of all enrollees’ individual risk scores, represents the plan’s predicted expenses

Answer 16

average risk score

Question 17

designed to mitigate any incentives for plans to attract healthier individuals and compensate those that enroll a disproportionately sick population.

Answer 17

risk adjustment

Question 18

compensates plans for their high-cost enrollees, and by the nature of its financing it provides a subsidy for individual market premiums generally over a three-year period.

Answer 18

Reinsurance

Question 19

reduce the general uncertainty insurers face in the early years of implementation when the new AcA market is opened up to people with preexisting conditions who were previously excluded.

Answer 19

risk corridors