Medical Care Economic Risk Measuring Financial Vulnerability from Spending on Medical Care (2012) / Chapter Skim
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3 Measuring Medical Care Economic Risk
3 Measuring Medical Care Economic Risk
Pages 133-154
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From page 133... ...
began by noting the importance of measuring MCER in the measurement of poverty. One reason to seriously consider a separate MCER is to increase the accuracy of the measurement of poverty.
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From page 134... ...
A third reason Wolfe mentioned to measure MCER is that it is sensitive to public policies that influence medical care coverage, such as Medicaid, Medicare, and provisions of the 2010 Patient Protection and Affordable Care Act (ACA)
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From page 135... ...
• Should the core unit be the individual or the family? Medical care economic risk is an individual concept, even though one's insurance coverage may be at either the individual or the family level.
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From page 136... ...
Sarah Meier (University of Wisconsin–Madison) next discussed the need for developing a separate index, reviewed the literature on medical care risk indexes created by a number of people, reviewed various design considerations in developing an MCER index, and suggested a framework for developing this index.
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From page 137... ...
Taking each claim type separately and the risk cells within the claim type, expenditure distributions are fit to the risk cell/claim type combinations, using actual claims experience.
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From page 138... ...
, Meier highlighted some of the important criteria for the design of a measure of MCER that have been specified in prior literature. As stated previously, the 1995 NRC report recommended a prospective measure of medical expenditure risk, as well as a family-level measure, using the official poverty measure or SPM definition of family.
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From page 139... ...
Measuring Family Resources -- Family resources can be measured using an income definition consistent with the official poverty measure, or the SPM, plus consideration of assets. To account for assets, an annuitized value could be constructed whereby a family is projected to receive the value of an annual flow of income from its financial assets based on the life expectancy of adults in the family, using existing life tables.
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From page 140... ...
The definition of an affordability threshold should probably vary by the family's relative resource level -- that is, its resources relative to the level of income required to cover basic needs under the SPM and the official poverty measure. At least as a starting point, the affordability thresholds outlined in the ACA could be considered.
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From page 141... ...
So, when one thinks about medical expenses in these terms, perhaps the ACA is a game changer for incorporating medical expenses into poverty measurement. If all are required to buy insurance, then the key question is how much insurance is enough to protect consumption related to basic needs other than medical care.
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From page 142... ...
The second index -- on which this workshop is focusing today -- would quantify the risk of being poor, as defined by the first index, because of inadequate insurance for the out-of-pocket component. As Meier and Wolfe suggest, Short concluded, that could be the probability of falling into poverty -- the probability that high out-of-pocket medical expenses would put a family below the poverty threshold.
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From page 143... ...
The 1995 NRC panel's solution to this problem was to suggest that family resources be calculated by subtracting the amount of money a family spent on health insurance premiums and out-of-pocket medical expenses -- or the predicted amount of money it was expected to spend -- from the other resources it had to pay for necessities. If family resources minus out-ofpocket medical expenses were too little to cover the cost of these nonmedical necessities in the thresholds, then the family was to be classified as poor.
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From page 144... ...
With good information about the person's current private insurance or potential eligibility for public health insurance in the event of a health crisis, it may be possible to devise a probability distribution of the person's net spending -- on insurance premiums and copayments -- after reimbursement is received. The closer one comes to assessing the risks facing a particular person, the wider the predictable inequality of risks across people.
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From page 145... ...
Using their preferred method of assessing medical risk, or some other method that they might be willing to accept as a second-best alternative, how would they then use data from the Medical Care Expenditure Panel Survey, the Current Population Survey, the Survey of Income and Program Participation, or some other data set to place given survey respondents into the risk cells that they recommend, and then determine whether that person is a member of a poor family or a nonpoor family? What he is looking for is concrete and specific guidance about how to actually implement their preferred methods, not just a discussion of general principles.
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From page 146... ...
He reiterated that these two assumptions underlying the SPM are a barrier to designing a useful measure of medical care economic risk. Meier and Wolfe suggest a cell-based approach to modeling medical risk.
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From page 147... ...
A better solution would be to abandon the NRC approach to medical needs, include medical out-of-pocket in poverty thresholds, and move ahead with MCER based on the other purposes it could serve. The two weakest points in the 1995 NRC report are the handling of medical care needs and the rationale behind its poverty threshold concept.
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From page 148... ...
said she was interested in including health insurance premiums in producing thresholds, as Short mentioned. The health insurance premium payment is intended to reduce risk, and there is also one's expected out-of-pocket expenditures during a certain period of time to be taken into account.
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From page 149... ...
They are two different things. Meier noted that her presentation did not mention that the discussion of risk cells in the paper does not advocate an expected value approach, because expected value, instead of examining the spectrum of potential outcomes, gives one singular measure that is a poor representation of risk in the catastrophic context.
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From page 150... ...
John Czajka (Mathematica Policy Research) observed that one of the issues the study panel has to deal with is the intersection between income poverty and this risk index.
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From page 151... ...
That might sound strange, she said, but one would not want parents to be forgoing services because there was only so much money in the family and they decided to devote their medical care money toward the children in the family, for example. She stated that she knows that in the data indicate decisions in which families are operating as a unit and are allocating their consumption in certain ways.
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From page 152... ...
He questioned why the study panel would want to develop a measure of economic ex ante risk. That is a complex undertaking, requiring the joint modeling of economic resources and risk for health care spending and producing ex ante probability distributions that are not just a variance but the very high end because of the skewed distribution of outcomes.
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From page 153... ...
The data will allow one to integrate over all the insurance packages and economic positions that people occupy and take account of the covariances between their economic position and their health status and family situations. Developing the ex ante risk index would be like developing a poverty index to predict that next year X numbers or a fraction of people are going to be in poverty.
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