Adverse to whom? Insurance company fears of ‘adverse selection’ may be unfounded

For decades, insurance companies have been pricing policies based on the belief that adverse selection comes into play among their customers. Adverse selection is what happens when the people who need protection most — those, for example, with the greatest health problems or worst driving records — buy lots of coverage. But Michael Keane, professor of economics at the W. P. Carey School of Business, says there are no empirical data proving adverse selection. In fact, insurance companies often benefit from "advantageous selection," because the people who are the best risks also are their best customers. In reality, those who need lots of coverage often do not buy it — usually because they don’t understand the offerings. Policy makers and political leaders who are trying to reform healthcare should take note, Keane says.

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Regina Herzlinger makes the case for change in health care

Regina Herzlinger has been dubbed "the Godmother of Consumer-Driven Health Care," and without question she is a revolutionary in her field. It was Herzlinger who pulled back the curtain to reveal the unraveling of managed care, and who predicted the rise of consumer-driven health care and health care-focused factories. What would this forward-thinker have to say about alternatives to the current single-payer-by-employer health insurance system? Probably not replacing it with a similar single-payer-by-government health insurance system. Herzlinger recently delivered the Second Annual Health Economics and Policy Lecture at the W. P. Carey School.

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Doctors who care for the poor: Paying the hidden cost of Medicaid

A groundbreaking study has finally put a dollar figure on a previously unanswered question: how much do physicians’ practices, due to government regulation, pay to ensure their poorest patients get the right prescription drugs? Turns out the answer is $8.02 per prescription, on average, or $1,110 annually for high blood pressure and high cholesterol medications alone, according to research from Jonathan D. Ketcham, an assistant professor at the W. P. Carey School of Business, and Andrew J. Epstein, an assistant professor at the Yale School of Medicine.

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VEBAs: Autoworkers’ union shares the risk of rising health care costs

The tentative contract agreement that assigned a role to the United Auto Workers in managing the healthcare costs of its General Motors members was a turning point in the relationship between business and labor — and a sign of things to come in a global economy. In fact, Chrysler was seeking similar healthcare concessions in contract talks with the union. It’s all about risk-sharing. VEBAs — Voluntary Employee Beneficiary Associations — will most likely make declining U.S. manufacturing industries more competitive; however, they may do little to reverse sagging U.S. union participation, according to experts at the W. P. Carey School of Business.

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