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Can Big Data Cure Risk Selection In Healthcare Capitation Program? A Game Theoretical Analysis, Zhaowei She, Turgay Ayer, Daniel Montanera

Research Collection Lee Kong Chian School Of Business

Problem definition: This paper analyzes a market design problem in Medicare Advantage (MA), the largest risk-adjusted capitation payment program in the U.S. healthcare market. Evidence exists that the current MA capitation payment program unintentionally incentivizes health plans to cherry pick profitable patient types, which is referred to as “risk selection”. However, the root causes of the risk selection are not comprehensively understood, which we study in this paper. Academic / Practical Relevance: The existing literature primarily attributes the observed risk selection in MA market to data limitations and low explanatory power (e.g. low R2) of the current risk adjustment design. …