Medical Care Economic Risk Measuring Financial Vulnerability from Spending on Medical Care (2012) / Chapter Skim
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Conceptual Framework for Measuring Medical Care Economic Risk--Sarah Meier and Barbara Wolfe
Conceptual Framework for Measuring Medical Care Economic Risk--Sarah Meier and Barbara Wolfe
Pages 225-266
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From page 225... ...
We consider the advantages of a separate index versus incorporating medical risk into a single index of poverty; we address the appropriate unit of observation, arguing that medical risk is best measured at the individual level and then aggregated; we argue for the need to go beyond average expenditures, because risk at its core refers to expenditures in the tail; we discuss the issue of over- and underutilization and how to incorporate insurance coverage into resources. We briefly discuss data needs, focus on methodology and argue for a prospective measure.
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From page 226... ...
It allows comparison across groups in the population defined by age, family structure, race/ethnicity, health or disability status, and geography; and it can provide information on the dynamics of deprivation or poverty by providing trends over time. Review of Current Poverty Measure and Related Core Issues The current poverty measure has two components: a set of poverty thresholds or lines specific to family size and a definition of family income to be compared with the thresholds.
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From page 227... ...
Thus, rather than a comprehensive measure of economic well-being, the official poverty measure is a very narrow concept that is not influenced by real changes in public policy or changes in the relative prices of core consumption items. 2011 Release of Supplemental Poverty Measure The Supplemental Poverty Measure (SPM)
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From page 228... ...
Although the poverty measure arguably did not capture the full importance of the relationship between medical need and poverty in the early decades of its use, the sheer growth of medical care expenditures as a proportion of domestic spending has probably exacerbated the real effect of this prob 3 The three-parameter scale is equal to (adults + α * children)
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From page 229... ...
Although change in the treatment of medical expenditures under the SPM is an important component of this process, it is not the only relevant step. We suggest that recognition of the need for an index that captures the extent of medical care economic risk faced by members of society is an important step forward in documenting the full relationship between medical care need and poverty.
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Specifically, in its 1995 report, the panel advocated the development of a two-index approach to poverty measurement. The first index would exclude medical care needs from the thresholds and medical care benefits from resources.
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From page 231... ...
Four arguments are presented below. Four Arguments Reducing Health Expenditure Risk Is an Important Component of Eliminating Poverty: The suggestion that poverty and health are dynamically related alludes to the old question: Does poor health cause poverty, or does poverty cause poor health?
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From page 232... ...
Importantly, in the case of medical expenditures, the difference between expected and observed need can be quite large if an individual does not have insurance. In the case of prospective assessment, a measure of medical care economic risk can help to identify those who might end up in poverty due to medical expenses.
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At the start of the previous year, before the outcome of no health expenditures is realized, one of these individuals is handed insurance coverage for which the premium is fully subsidized. All other things equal, were these two individuals equally well off over the past year?
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In making this argument, we note the loss of simplicity offered by a single measure and recognize that, for policy purposes, the need for simplicity may dominate the wish for greater accuracy. Even in this view, we still favor the calculation of a separate medical care economic risk index to capture current and changing medical risk as a separate and important indicator of well-being and deprivation.
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There is no very simple way to capture medical risk: insurance coverage differs, new treatments and hence expenditures continuously change, there is both u nder- and overusage, and there is a trade-off between detail and accuracy and feasibility of approach. CRITERIA FOR DEVELOPMENT OF AN MCER INDEX This section identifies a number of primary design factors that must be addressed during the development of the MCER index.
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From page 236... ...
. We suggest a family-level unit of analysis, in which the definition of family unit conforms to the definition applied under the official poverty measure or the definition introduced under the SPM.11 The Interagency Technical Working Group on Developing a Supplemental Poverty Measure recommended that the family unit include "all related individuals who live at the same address, any co-resident unrelated children who are cared for by the family (such as foster children)
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From page 237... ...
As well, data should be "timely, comprehensive, routinely available and accessible." In the selection of the data source, it also relevant to consider how the medical care risk index might be coordinated with economic poverty measures. Additional Recommendations In this section, we evaluate in greater depth a number of core design elements, including the measurement of medical risk, valuation of medical resources, and the definition of affordability.
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From page 238... ...
Accordingly, we suggest that developers begin by specifying a measure of individual medical expenditure risk that is ultimately aggregated to form a family-level measure of expenditure risk. In addition, we suggest that index developers either rely on an existing risk adjustment model to form an appropriate system of risk classification or develop a simplified risk model that is informed by the current state of knowledge in this field.
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From page 239... ...
14 Some models use additional inputs, such as pharmacy codes, procedure information, laboratory results, prior expenditures, and even information from health risk assessments -- factors unlikely to be used for the medical care economic risk index tied to poverty, because the data requirements might limit the timeliness of the measure. 15 van de Ven and Ellis (2000)
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From page 240... ...
The Definition of Appropriate Medical Care Coverage. It is highly recommended that the risk measure adopted in the index reflect expenditure risk under a standardized basket of medical care services.
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In the previous section, we suggested individual-level classification of health risk. Similarly, we recommended an individual unit of analysis for the purpose of modeling the relationship between expenditures and health risk.
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. In either case, developers must identify appropriate methods, either actuarial (e.g., fitting loss distributions to a set of mutually exclusive risk cells)
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, after adjusting for coverage characteristics, individual loss distributions could be aggregated to produce a familylevel probability distribution of out-of-pocket expenses. A final estimate of family probability of exceeding an affordability threshold would combine information on premium costs, insurance coverage, and individual loss distributions.
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Under this approach, sample members would be assigned to one actuarial cell from a set of mutually exclusive risk cells. An individual's measure of expected expenditures would be based on probabil 19 Again, we direct the reader to Mullahy (2009)
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include rela tive risk scores developed using DCG models; relative risk scores can be used to compute these individual-level estimates.20 2. Develop a unique risk model using the MEPS data files; assign individuals a measure of expected expenditures based on the pa rameters from this model.
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From page 246... ...
In part, the MCER index should measure whether a family's insurance offers sufficient protection against medical expenditure risk. To meet this objective, we suggest that the index methodology first produce a measure of family-level risk protection and then assess separately whether this level is sufficient given family characteristics.
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This annuitized value would be added to income and compared with unprotected expenditure risk. We note, as well, that postinsurance risk can be represented as a measure of expected expenditures or a distribution of potential expen ditures.
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the official Poverty Measure, (2) Post-tax Measure, (3)
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· Individuals are categorized as high or low risks based on an esti mate of their expected expenditures; those with expected expen ditures in the upper 25th percentile are considered high risks, the remaining individuals are considered low risks. · Expected expenditures are computed from a linear regression model with age, race/ethnicity, sex, income, perceived health sta tus, disability days, and limitation of usual activity as independent predictors.
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From page 250... ...
Doyle recommends adoption of the Short and Banthin method, with the following modifications: · Incorporate income definitions applied under the traditional or proposed poverty measure revision. · The measure should be designed for application across the popula tion, with the exception of individuals residing in institutions.23 · Consider public insurance, public coverage combinations, and public-private coverage combinations.
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· Applying coverage characteristics, this joint claims distribution can be "mapped" to a distribution of out-of-pocket expenditures; individual distributions and coverage characteristics are combined to form family-level distributions of out-of-pocket expenditures. Although we develop an MCER framework that can be adapted under alternative measurement approaches, the suggested measure of family-level expenditure risk is a simplified version of the Handel model.
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From page 252... ...
Three categories of variables are necessary to construct an adequate index: health characteristics and related medical risk variables, insurance coverage and coverage design characteristics, and family-level economic resource information. Expenditure risk models should be developed using a data set that collects detailed and reliable expenditure data, such as the MEPS data.
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From page 253... ...
with the data set used for the poverty measure or the SPM, and the ability to produce stable population estimates of MCER distribution/ outcome at the state level. The MEPS data currently do not include sufficient information on insurance characteristics to construct the MCER index as it is conceptualized in this paper.
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· Developers must determine whether it is necessary to model expen diture risk separately across service types. Finally, developers must identify an appropriate operational definition of medical expenditure risk;25 some alternatives include 25 Although we separate the measurement of expenditure risk from considerations of premium costs, the definition of affordability should consider a family's premium costs and expenditure risk.
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As well, this approach assumes that the uninsured/underinsured in a given risk cell have the same underlying health risk as the members of the same cell who have sufficient insurance (e.g., the same expected expenditures or same probability of tail expenditures)
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· Identify the family unit and (assuming independence) aggregate individual distributions of out-of-pocket losses to the family level.
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27 Doyle (1997) recommends that income definitions utilized under a medical risk index reflect those adopted under one of the poverty measures.
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Following this approach, these expenditures should be excluded when loss distributions are fit to the claims experience observed in each risk cell. Although this approach correctly distinguishes between expenditures that are known with certainty and expenditure risk, we suggest that in practice it is difficult to assign a correct measure of known expenses prospectively.
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In the case that Risk Measure II (expected costs) is selected, the next steps entail subtracting premium costs from the affordability threshold and comparing this value with the family's insurance-adjusted expected expenditures.
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Development of an operationally feasible index may necessitate that developers introduce a relatively coarse system of risk classification. Similarly, the final index might reflect a simplified examination of the impact of insurance coverage characteristics on family expenditure risk.
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From page 261... ...
Finally, we note that the suggested framework does not distinguish between medical risk that is not modifiable and medical risk that can be prevented or reduced through the use of preventive services or good care management practices. Research in this direction might identify other important routes to reducing the medical care economic risk experienced by families.
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Risk Cell Model II (survey collected data; claims data necessary) Characteristic Categories Gender × age Female × age (20-30 categories)
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From page 263... ...
CONCEPTUAL FRAMEWORK FOR MEASURING MCER 263 ANNEX B THE MASSACHUSETTS 2010/2011 MINIMUM CREDITABLE COVERAGE STANDARDS Coverage for a broad range of medical services. Specifically: · Ambulatory patient services, including outpatient day surgery and related anesthesia · Diagnostic imaging and screening procedures, including X-rays · Emergency services · Hospitalization, including at a minimum, inpatient acute care ser vices, which are generally provided by an acute care hospital for covered benefits in accordance with the member's subscriber cer tificate or plan description · Maternity and newborn care · Medical/surgical care, including preventative and primary care · Mental health and substance abuse services · Prescription drugs · Radiation therapy and chemotherapy · Doctor visits for preventive care, without a deductible · A cap on annual deductibles of $2,000 for an individual and $4,000 for a family for services received in-network · For plans with up-front deductibles or coinsurance on core services, an annual maximum on out-of-pocket spending of no more than $5,000 for an individual and $10,000 for a family for services received in-network · No caps on total benefits for a particular illness or for a single year · No policy that covers only fixed dollar amount per day or stay in the hospital, with the patient responsible for all other charges · For policies that have a separate prescription drug deductible, it cannot exceed $250 for an individual or $500 for a family for services received in-network In 2011, the standards will also include · No fixed-dollar cap on prescription drug benefits · Core medical services and a broad range of medical services for any dependents, if dependents are covered An exemption is available for people who have a firmly held religious belief that prevents them from enrolling in a health plan.
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From page 264... ...
Powerpoint presentation at the meeting of the National Research Council/Institute of Medicine Panel on Measuring Medical Care Economic Risk in Conjunction with the Supplemental Poverty Measure Committee on National Statistics, February 16, Washington, DC. Banthin, J.S., and Bernard, D.M.
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From page 265... ...
. Unit of Analysis for Poverty Measurement: A Comparison of the Supplemental Poverty Measure and the Official Poverty Measure.
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