A New Can Of Worms
30 December 2003
The Answer to Cherry Picking

One of the gripes regarding free market health care reforms is that private insurers will cherry pick the healthiest medicare recipients leaving the government to be responsible for the sickets patients. Today's WSJ(link requires subscription) points to a solution to this "problem:"

"When private insurance companies handle Medicare, experts always worry that they will try to attract only healthy people, leaving the sickest for the taxpayer to cover. Starting Jan. 1, the government will try to remedy that by paying private insurers more for covering people with costly diseases such as diabetes.

The idea is 'risk adjustment,' and its premise is simple, says Joseph Newhouse of Harvard University.

'If your plan has worse risks than my plan, your plan should get paid more,' says Dr. Newhouse, whose field is health policy. When the Medicare program gets under way next month, 30% of the payments to insurers will be risk-adjusted based on the health of the people who sign up. The percentage will rise gradually until it reaches 100% in 2007."

In the private sector, if you have an unhealthy life style you pay more for health insurance. If you have a bad driving record you pay more car insurance. It only makes sense that sicker medicare recipients pay more to move in private programs.

Gee, it only took 40 years for the government to figure this one out.

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