Risk adjustment of the allocated health budget to health plans plays a major role in the functioning of competitive social health insurance systems. Whenever the risk adjusted allocation is below the expected marginal cost of care for a given person, incentives for risk selection arise. Since...

The current risk adjustment formula distorts the intended competition on good quality care among the sickness funds, and turns it into a competition on profitable members. After 18 years of using incorrect rates, the Israeli risk adjustment rates should be calculated, as is common in other...