functioning by reducing or compensating for risk selection. These involve (1) narrowing or eliminating differences in individual or group premiums based on age, gender, health status, or other risk factors, (2) limiting health plan discretion in benefit design, regulating marketing practices, and otherwise closely managing the terms of competition among health plans, (3) risk adjusting employers' or governments' (not individuals') payments to health plans to reflect differences in risk level of their membership, and (4) establishing special mechanisms for handling high-risk individuals.
The committee recognizes that these policies and techniques will not directly attack the problems of increasing health care costs and may in fact increase costs for some while lowering them for others. However, some improvements in techniques for risk adjustment may help researchers better assess the performance of health care providers and better evaluate the value of specific medical services. The next chapter examines health care costs and considers further the question of value.