Patient Selection in a Competitive Health Care System

Prologue: During the 1980s, as alternative medical care delivery systems have proliferated and nonprofit and commercial health insurance carriers have competed to remain viable enterprises, the insurance market has splintered into an array of new choices. As this more competitive environment has evolved, one increasingly important development in the health policy realm is how insurers select patients. Patients deemed high medical risks obviously cost considerably more than patients with fewer maladies. Within this context, it has become clear that as health insurers grow ever less willing to cross-subsidize hospital expenditures that are not otherwise covered—that is, indigent care and graduate medical education expenses—patient selection becomes a paramount concern of provider and payer alike. In this article, Harold Luft and Robert Miller examine the multitude of issues that arise around the subject of patient selection. Luft holds a doctorate in economics from Harvard University and also took a postdoctoral fellowship at Harvard's Center for Community Health and Medical Care. He is a professor of health economics at the University of California, San Francisco (UCSF), and associate director of the Institute for Health Policy Studies there. Luft has built a national reputation as a brilliant analyst of complicated public policy issues, not the least of which is the question of patient selection. Luft asserts that biased patient selection exists; few people doubt that conclusion. The policy challenge, he concludes, is for third-party payers to craft adjustments in their payments to compensate for unequal risks. Robert Miller holds a doctorate in economics from the University of Michigan. He currently is taking a two-year postdoctoral fellowship at UCSF under the sponsorship of the Pew Charitable Trusts. Among the major research pursuits of Miller, who is a Canadian, are the examination of long-term care issues—particularly comparing these issues as they are being addressed in the United States and Canada—and patient selection questions, a very important subject in the context of long-term care.