The imperfect risk adjustment of prospective payment for hospitals may have dramatic consequences on equity. If the hospital is able to distinguish subgroups of patients with different expected costs within a group for which the risk-adjusted payment per admission is the same, it is likely to...

The cream skimming? effect in the insurance sector occurs when the insurer has the possibility to select individuals whose risk-adjusted per capita payment he considers to be above the expected cost level. To avoid this possibility of selection, the public authority has to determine a financing...