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This paper suggests an approach to deal with an estimation problem which is often encountered in analyzing the longitudinal cost data gathered in a clinical trial. The source of that estimation problem is twofold: 1) a considerable number of missing data due to treatment-related withdrawal of severely affected patients with high health care costs in only one the treatment groups and 2) a heavily skewed cost distribution due to rare high-cost events. The approach is illustrated using data from a trial comparing 3 different drug regimes. In order to calculate costs per patient-year in case of selectively missing data we extrapolated the costs of patients with incomplete follow-up. Due to the skewness and the associated large variance in costs per patient-year, these costs cannot be analyzed using common parametric statistical methods relying on underlying normal distributions. A logarithmic transformation was performed to approximate a normal distribution, reduce the impact of extreme values and create similar size variances in the treatment groups. An ordinary least squares regression analysis of transformed data then standardized for differences in patient characteristics between the groups. For the retransformation, the so-called smearing estimate was used. This 'transformation-standardization-retransformation' approach enabled us to provide more consistent and efficient estimates of cost differences that were shown to be statistically significant and judged to be important.

The Netherlands relies on risk equalization to compensate competing health insurers for predictable variation in individual medical expenses. Without accurate risk equalization insurers are confronted with incentives for risk selection. The goal of this study is to evaluate the improvement in predictive accuracy of the Dutch risk equalization model since its introduction in 1993. Based on individual-level claims data (n = 15.6 million), we estimate the risk equalization models that have been successively applied in The Netherlands since 1993. Using individual-level survey data (n = 8735), we examine the average under-/overcompensation by these models for several relevant subgroups in the population. We find that in the course of years, the risk equalization model has been substantially improved. Even the current model (2012), however, does not eliminate incentives for risk selection completely. To achieve the public objectives, further improvement of the Dutch risk equalization model is crucial.

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ABSTRACT:The Dutch government has decided to proceed with managed competition in health care. In this paper we report on progress made with health-based risk adjustment, a key issue in managed competition. In 2004 both Diagnostic Cost Groups (DCGs) computed from hospital diagnoses only and Pharmacy-based Cost Groups (PCGs) computed from outpatient prescription drugs are used to set the premium subsidies for competing risk-bearing sickness funds. These health-based risk adjusters appear to be effective and complementary. Risk selection is not a major problem in the Netherlands. Despite the progress made, we are still faced with a full research agenda for risk adjustment in the coming years. In 19 8 8 t h e d u tc h g ov e r n m e n t began to implement radical marketoriented reforms in health care. Central government planning was to be replaced by a system of managed (or regulated) competition.1 Competing health insurers were to act as prudent buyers of care on behalf of their members. However, the transformation of a centrally planned health care system into managed competition appeared to be politically, technically, and institutionally complex. Workable competition cannot be introduced overnight. It requires prolonged investments in developing an adequate system of risk adjustment, product classification and quality management, an appropriate consumer information system, and, last but not least, an effective competition policy. None of these preconditions was in place in 1988, which explains the substantial time gap between the adoption of the market-oriented reform plans and their actual implementation.In the past fifteen years, however, successive governments consistently worked to realize these preconditions. Much progress has been made-for example, with respect to competition policy and risk adjustment. In this paper, as a follow-up to our earlier paper, we report on progress toward health-based risk adjustment in the Netherlands in the past decade. First, we discuss some key elements of the Dutch financing system and the rele-

It is concluded that the self-reported health measures make an independent contribution to forecasting health care expenditures, even if the prediction model already includes diagnostic and pharmacy-based information currently used in Dutch risk equalization models.