NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Jason Brown

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April 2011How does Risk Selection Respond to Risk Adjustment? Evidence from the Medicare Advantage Program
with Mark Duggan, Ilyana Kuziemko, William Woolston: w16977
Governments often contract with private firms to provide public services such as health care and education. To decrease firms' incentives to selectively enroll low-cost individuals, governments frequently "risk-adjust" payments to firms based on enrollees' characteristics. We model how risk adjustment affects selection and differential payments---the government's payments to a firm for covering an individual minus the counterfactual cost had the government directly covered her. We show that firms reduce selection along dimensions included in the risk-adjustment formula, while increasing selection along excluded dimensions. These responses can actually increase differential payments relative to pre-risk-adjustment levels and thus risk adjustment can raise the total cost to the government...

Jason Brown, Mark Duggan, Ilyana Kuziemko, and William Woolston. “How Does Risk Selection Respond to Risk Adjustment? Evidence from the Medicare Advantage Program” forthcoming in American Economic Review.

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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