Even more questions for 8M

[bambi]

Here are some more questions:

1. Sutton and Sorbo Chapter 5, pg. 56: At the bottom of the page, the example, let us say for the 1st quarter is [11*101.23+1*113.59]/12. Where does the 11 and 1 come from? Is it weighting 11 months for the 1st year's rate and 1 month for the 2nd year's rate? Why?

2. Sutton and Sorbo Chpater 11, pg. 83, I noticed that for the stop loss part, an additional amount was added to the capitation if the stop loss was less. Shouldn't it be that the lower the stop loss limit that the medical group is willing to take, the less risk they are assuming, so an amount should be subtracted from the capitation (in other words, why add $1.00)? Similarly, the higher the copay, this means the less the medical group will be pocketing in cash from the patient, so shouldn't we add to the capitation (not subtract $0.58)?

[Phil]

I think Sutton and Sorbo make everything up as they go along. If you make a mistake on a math question on the exam, don't bother erasing it, just write: "following the method from Sutton and Sorbo..."

[McBain]

1. Yes, it is weighting 11 months for the 1st year's cost, and 1 month for the 2nd year's cost. They are doing it that way because, on average, groups with effective dates in the 1st quarter will be exposed to 11 months at the lower rate and 1 month at the higher rate.

In the second paragraph from the bottom on p. 55 they say "The capitation rates for each quarter are based on......, assuming the effective dates for members are uniformly distributed across each month of every quarter". What they don't explicitly say is that groups are only effective at the beginning of the month. Given that, the average effective date for groups issued in the 1st quarter is Feb 1...therefore exposing them to the 11 months at the lower rate.

This definitely isn't explained very well. And it's not my only beef with this book. Did anybody else notice the totally lame example of the "wrong way" to composite rates in Table 5-5?? Under letter "D", the only thing "wrong" in the example is that they use the incorrect input from section C...the methodology is still right. Not too terribly illuminating.