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Health policy

Misguided incentive

München, 06/14/2017

Do health insurers try to influence diagnoses to obtain higher payments from the risk adjustment scheme in the German Statutory Health Insurance? A study co-authored by LMU health economist Amelie Wuppermann suggests that this might indeed be the case.

In 2009, the Statutory Health Insurance in Germany introduced a morbidity-based risk adjustment mechanism. The frequency of diagnoses relevant to the mechanism has increased disproportionately since the introduction of the reform. Foto: bnenin / fotolia.com

Do health insurers manipulate diagnoses in order to claim higher levels of reimbursement from the risk adjustment scheme in the German Statutory Health Insurance? Jens Baas, CEO of the Techniker Krankenkasse, one of Germany’s leading health insurers, caused quite a stir when he suggested as much last autumn, though the allegation remains contentious. In 2009, the Statutory Health Insurance in Germany introduced a morbidity-based risk adjustment mechanism. Its stated purpose was to ensure that the market remained competitive by allowing for higher payments (which are allocated from a fixed budget) to those providers whose client base is more likely to suffer from conditions that are highly prevalent and costly to treat. The 80 conditions listed include diabetes, hemophilia and particular types of cancers. The scheme was introduced in order to ensure that insurance providers whose enrollees have these conditions would not be at a financial disadvantage relative to competitors with a higher proportion of healthy people on their books.

“We asked whether or not the frequency of diagnoses that trigger higher payments to insurance providers had changed since the reform was introduced,” says Amelie Wuppermann, Junior Professor of Microeconometrics in LMU’s Faculty of Economics. Together with co-authors based at the Center for Global Development in Washington DC and the German Federal Social Insurance Authority (Bundesversicherungsamt) in Bonn, she had access to 1.2 billion diagnoses registered with the Authority by insurance providers during the period from 2008 to 2013. The study revealed a systematic change in the classification of these diagnoses during these years. The results have now been published as a CESifo Working Paper, and will appear shortly in the Journal of Health Economics.

The study shows that the frequency of diagnoses relevant to the risk-adjustment mechanism has increased disproportionately since the introduction of the reform. “The design of our study allows us to conclude that this effect is attributable to an increase in the fraction of validated diagnoses of these illnesses recorded by medical practitioners, and does not reflect a rise in the actual incidence of these diseases,” Wuppermann affirms. However, whether or not insurers had a hand in promoting this development cannot be unequivocally deduced from the data. “Contracts referred to as Betreuungsstrukturverträge offer one possible means of doing so. The purpose of these agreements between insurers and regional physicians’ associations is to improve the coordination of healthcare for patients with serious or chronic illnesses, but they can be used to channel higher payments to doctors who report specified diagnoses,” Wuppermann explains. Meanwhile, German lawmakers have prohibited the practice of supplementary payments to doctors for the coding of diagnoses. Nevertheless, not all legal loopholes have been blocked. “Given the considerable financial incentives involved, however, further studies are required to determine whether the new measures, which became law in April, are having the intended effect,” says Wuppermann. (CESifo Working Paper 2017)

On a related topic, see:

Taking another look at the data