The European Journal of Health Economics

, Volume 20, Issue 9, pp 1359–1374 | Cite as

Modest risk-sharing significantly reduces health plans’ incentives for service distortion

  • Shuli Brammli-GreenbergEmail author
  • Jacob Glazer
  • Ruth Waitzberg
Original Paper


Public payers often use payment mechanisms as a way to improve the efficiency of the healthcare system. One source of inefficiency is service distortion (SD) in which health plans over/underprovide services in order to affect the mix of their enrollees. Using Israeli data, we apply a new measure of SD to show that a mixed payment scheme, with a modest level of cost-sharing, yields a significant improvement over a pure risk-adjustment scheme. This observation implies that even though mixed systems induce overprovision of some services, their benefits far outweigh their costs.


Service distortion Adverse selection Capitation Payment mechanisms Risk-adjustment Risk-sharing Managed care Managed competition 

JEL Classification

I13 I18 



An earlier version of this paper was presented at the Risk-Adjustment Network Workshop held in October 2016 in Berlin, Germany. The authors are especially grateful to Konstantin Beck, Randall Ellis, Timothy Layton, Thomas McGuire, Amir Shmueli, Wynand Van de Ven, Richard Van Kleef, and other participants in the workshop for their helpful comments and advice. The authors are also grateful to Glied Sherry, Altman Stuart, Freed Gary and Wittenberg Raphael for their constructive suggestions. This study was funded by a Grant provided by the Israel National Institute for Health Policy Research (Grant number 2012/37).

Compliance with ethical standard

Conflict of interest

The authors declare no potential conflict of interest.


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  • Shuli Brammli-Greenberg
    • 1
    Email author
  • Jacob Glazer
    • 2
  • Ruth Waitzberg
    • 3
    • 4
  1. 1.Myers-JDC Brookdale Institute and The Hebrew UniversityJerusalemIsrael
  2. 2.The University of Warwick and Faculty of ManagementTel Aviv UniversityTel AvivIsrael
  3. 3.Myers-JDC Brookdale Institute, Ben-Gurion UniversityBeer-ShevaIsrael
  4. 4.Technische Universität in BerlinBerlinGermany

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