Risk adjustment is used in settings with uncertainty to make payments or allow comparisons of outcomes while controlling for exogenous risk factors that explain variations in the outcome of interest, such as spending, utilisation, quality or death. This article focuses on the conceptual and empirical uses of risk adjustment in health economics, where patient-level risk factors are commonly used to explain spending and other outcomes.
KeywordsAdverse selection Biased selection Health economics Health insurance Health outcomes Life insurance Life tables
JEL ClassificationsG22 I11 I13 I182
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