Risk-Adjusted Capitation: Recent Experiences in the Netherlands

Prologue: “Americans know too little about the implementation of market-reform strategies in other countries,” says Alain Enthoven, whose work on managed competition has formed the underpinnings of the most recent health system reforms in the Netherlands, In fact, he continues, “the Dutch are farther down the road to managed competition than we [Americans] are,” In this paper four leading Dutch researchers bring the American policy audience up to date on how managed competition is being implemented in their country. What is critical to the success of reforms, both in the Netherlands and in the United States, are risk adjustment mechanisms to prevent cream skimming—that is, to prevent plans from selecting the best health risks and avoiding those predicted to cost more. In a health system based on up-front capitation, health plans see it in their interest to attract persons whose costs will not exceed the amount paid to the plan for their care. Wynand van de Ven is a professor of health insurance in the Department of Health Policy and Management at Erasmus University Rotterdam, in the Netherlands. He holds a doctoral degree from the University of Leiden and has served as a consultant to health system reform efforts in New Zealand, Sweden, Russia, Poland, and Israel, René van Vliet is associate professor of health economics in the same department; his doctoral degree also is from Erasmus. Erik van Barneveld is an assistant professor in the department, where he focuses on the use of mandatory community-rated high-risk pooling, which is another element of the risk-adjusted capitation examined in this paper. Leida Lamers is also an assistant professor in the department. With a background in psychology, Lamers focuses her research on the use of diagnostic information as a potential risk adjuster. Abstract: The market-oriented health care reforms taking place in the Netherlands show a clear resemblance to the proposals for managed competition in U.S. health care. In both countries good risk adjustment mechanisms that prevent cream skimming—that is, that prevent plans from selecting the best health risks—are critical to the success of the reforms. In this paper we present an overview of the Dutch reforms and of our research concerning risk-adjusted capitation payments. Although we are optimistic about the technical possibilities for solving the problem of cream skimming, the implementation of good risk-adjusted capitation is a long-term challenge.