(Bloomberg View) — Most Americans know they have a personal credit score, and many know where to find it. Few know they also have a personal health risk score. If these were better known, and better constructed, health insurance markets in the U.S. would work more smoothly.
Commercial health insurance plans, as well as Medicare, Medicaid and other government programs, generate risk scores every year for most of the people they cover. These scores are estimates of each person's cost of care, compared with the average costs in a large population. And they play a big role in health insurance; they're often used, for example, to determine how much more insurers are paid for sicker beneficiaries.
Why don't you know about your score? Because it belongs to your insurance provider, and it doesn't travel with you when you switch plans. A portable, higher-quality health risk score could help insurance function better. And, in time, generating more accurate scores for everyone shouldn't be that difficult.
A portable, reliable health risk score would enable insurers to better predict their costs. This could be especially helpful for the Affordable Care Act's public exchanges, which have encountered significant headwinds in large part because actuaries have not accurately foreseen the costs of enrollees. It is well known that predicting costs in large, stable populations is fairly straightforward, but in small or changing ones (such as new buyers of an exchange plan), it's notoriously difficult. Having access to accurate health risk scores would make it much easier.
The government already uses health risk scores to set prices for insurance companies on the Obamacare exchanges and in the private component of Medicare. With more accurate scores, though, it would become less important for the exchanges to attract a great number of young and healthy customers to make up for those who need more care. Similarly, more accurate risk adjustment would obviate the lingering debate over whether Medicare Advantage pays insurers more than what it would cost to cover the same people under traditional Medicare. And it would make it easier to manage alternative payment models such as bundled payments and accountable care organizations.
The authors say insurance claim information is less accurate than clinical records. (Image: Thinkstock)
Why give the current health grades a low grade?
Existing scores, including those used for the ACA public exchanges, are better than nothing, but they're not as reliable as they could be. This is in large part because they are calculated from data on medical claims.
Unfortunately, using claims for this purpose doesn't work well enough to account for most of the variance in health care spending. We could do a lot better.
Risk scores would be much more accurate if they were derived from clinical health data, such as that contained in electronic health records. To see the difference, imagine a woman who suffers a heart attack. The claims data will show that she was taken in an ambulance to a hospital, was admitted through the emergency room, had an angioplasty procedure, and ultimately was discharged. But these data will indicate little or nothing about her health thereafter. Electronic clinical data include the woman's blood pressure, cholesterol, weight, diabetes indicators and other details about her health. These could be used to generate a much more accurate risk score.
