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CHI Bangladesh Model DocumentationPopulation
Juvenileaging to 15birth
time juvenilebirth rate
Fecundaging to 50
time fecundfecund dying
nm mort ratefecund
juvenile dying
nm mort ratejuvenile
Matureaging to 60
time mature
Over 60
over 60 dying
nm mort rateover 60
mature dying
nm mort ratemature
<Fecund>
Under 5aging to 5
time under 5
under 5 dying
nm mort rateunder 5
mort rate under 5mort rate juvenile mort rate fecund mort rate mature
mort rate over 60
<effect of improvedhealthcare on mortality
rate>
Population simulates how many people are born and die each year:
Population deathsbirths+
+
+
-
The figure shows that as Population increases, births increase. And as Population increases, deaths increase but that causes Population to decrease. Thus, the “births loop” continuously increases Population, and the “deaths loop” brings Population back into balance.
The principal output of Population is the Population Insured Status. As the Population increases or decreases, it affects the number of people who are insured or noninsured.
The principal inputs to Population are birth and mortality rates and the “effect of effect of improved healthcare on mortality rate”.
There are two “initial conditions” that can be selected. One is called dynamic equilibrium in which the total population is distributed across age groups and the birth rate is computed to maintain the same total population over time. The other is called dynamic disequilibrium in which the initial value of each age group reflects the 2010 census. Although the dynamic equilibrium is purely hypothetical, it helps users to isolate the effect of changes in other parts of the healthcare system.
CHI Bangladesh Model Documentation
Enrolment
target enrolmentmarket fraction of target
market remaining
PotentialPrimary
EnrolmentPrimary
Enrolmentprimary enrolling
Prime enrollee contactwith potential enrollees
contacts withenrollees
sociability
enrolment by wordof mouth
rate of persuasionfrom enrollee
enrolment bysolicitation
disenrolling
normaldisenrolment rate
month to start chiinitiaitive change in potential
primary enrolment
time to changepotential primary
enrolment
<PrimaryEnrolment>
rate of persuasionfrom solicitation
average physicianaccess
time to averageavailability
disenrolment rate
<CHI Availability>
<CHI Accessibility>
fecund informalworkers
mature informalworkers
over 60 informalworkers
<CHIAttractiveness>
target marketattracted to offering
<Time>
<CHI Awareness>
total primaryenrolment
Because one of our goals is to understand how the market for healthcare insurance can emerge, we simulate enrolment in the proposed health plan. The target market is informal workers, most of whom are between the ages of 15 years and 60 years old. In the subject area, we estimate there are about 27,000 informal workers, and about twice as many men are classified informal workers as women. We assume people enroll because of two influences: advertising (solicitation) and word-of-mouth:
<Population>
informal workers+
target marketattracted to offering
+
CHI Attractiveness
+
PotentialPrimary
Enrolment
+
enrolling+
-
PrimaryEnrolment
+
+
primary enrolleecontact with
potential members
+
+
word-of-mouthinfluence
+
advertisinginfluence
+
disenrolling
+
disenrolment rate
+
AccessibilityAvailability
--
There are important questions to consider:
How much influence does advertising have? How much influence does word-of-mouth have? How does the attractiveness of the offering affect the size of the market? What causes the rate of disenrollment to change?
Because there is no comparable marketplace to study in Bangladesh, the model allows us to explore a wide range of assumptions that can change outcomes. For example, we can change the influence
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CHI Bangladesh Model Documentation
of both advertising and word-of-mouth to see how differently the market can grow. Or we can consider how access to medical care might change the disenrollment rate.
The principal inputs to Enrolment are Population, Attractiveness, Accessibility and Availability.
The principal output is Primary Enrolment.
Insured Status
Juvenile byInsured Status
Fecund byInsured Status
Mature byInsured Status
Over 60 byInsured Status
population by sexand insured status
time to enrol<time to enrol> <time to enrol> <time to enrol>
<PrimaryEnrolment><target enrolment
market>
fraction of informalworkers enrolled
<fecund informalworkers>
<mature informalworkers>
<over 60 informalworkers>
insured status
juvenile informalworkers
<Fecund><Juvenile>
<Mature> <Over 60><Under 5>
Under 5 byInsured Status
under 5 informalworkers
<under 5 dependentsof informal workers>
<juvenile dependentsof informal workers>
<fecund dependentsof informal workers>
<mature dependentsof informal workers> <over 60 dependents
of informal workers>
Insured status is highlighted in the model because we can assume that only informal workers are allowed in the health plan or we can assume that informal workers may enroll their dependents:
<informal workers>
portion of informalworkers enrolled
population by sexand insured status
dependents ofinformal workers
dependency ratio
In the model, we distinguish between ages and sexes because the healthcare utilization rates are very different amongst ages and sexes. In the full model, we simulate by male and female gender and age groups (cohorts) for children (under age 5 and juveniles under age 15 years), people of child-bearing years (fecund), those who are economically productive but no longer having children (mature), and those over age 60 years.
The principal inputs are informal workers, fraction of informal workers enrolled, and the dependency ratio.
The principal output is the population by sex and insured status.
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CHI Bangladesh Model Documentation
Dependencies (Dependents of informal workers)
under 5 dependentsof informal workers
juvenile dependentsof informal workers
fecund dependents ofinformal workers
mature dependents ofinformal workers over 60 dependents
of informal workers
dependency ratio
total dependents ofinformal workers
<targetenrolmentmarket>
<Fecund><Juvenile> <Mature> <Over 60><Under 5>
switch on dependentsof informal workers
<total population>
The Group estimates there are 3.5 dependents for each informal worker – the dependency ratio. The target enrolment market comprises all informal workers. Thus,
total dependents of informal workers =
dependency ratio
* target enrolment market
Units: people
When switch on dependents of informal workers = 1, total dependents of informal workers are distributed to the age and gender cohorts in the proportion of the total population:
under 5 dependentsof informal workers
juvenile dependentsof informal workers
fecund dependents ofinformal workers
mature dependents ofinformal workers over 60 dependents
of informal workers
dependency ratio
total dependents ofinformal workers
<targetenrolmentmarket>
<Fecund><Juvenile> <Mature> <Over 60><Under 5>
switch on dependentsof informal workers
<total population>
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CHI Bangladesh Model Documentation
Demand
<Juvenile byInsuredStatus>
<Fecund byInsuredStatus>
<Mature byInsuredStatus>
<Over 60 byInsuredStatus>
average juvenilenurse need
average fecundnurse need
average maturenurse need
average over 60nurse need
juvenile demand fornurse by status
average juvenilephysician need
likelihood of juvenileseeking care
juvenile demand forphysicians by status
likelihood of fecundseeking care
average fecundphysician need
fecund demand fornurse by status
<effect of adverseselection>
fecund demand forphysicians by status
<effect of adverseselection> <effect of adverse
selection>
<effect of adverseselection>
average maturephysician need
average over 60physician need
likelihood of matureseeking care
likelihood of over 60seeking care
mature demand fornurse by status
mature demand forphysicians by status
over 60 demand fornurse by status
over 60 demand forphysicians by status
<Under 5 byInsuredStatus>
likelihood of under 5seeking care
average under 5physician need
average under 5nurse need
<effect of adverseselection>
under 5 demand fornurse by status under 5 demand for
physicians by status
Demand is simulated as a perceived medical need. We do not have measured data to say what medical needs are, but we can look to Bangladesh or similar countries (in this case, Indonesia) to estimate how many times per year people of the same age and gender will seek care from a physician, nurse or community healthcare worker. We can assume the perceived need for medical care is the same regardless of insured status, but the likelihood of the people with needs is definitely influenced by their insured status. People with insured access to care seek it more frequently.
At the beginning of any large health plan, the most likely people to enroll are those with a perceived medical need. In economic terms, this is called “adverse selection”. That is, the selection is adverse to the operation of the health plan because the early insured people demand more care than those who sign up later.
<Population byInsuredStatus>
average medic need
likelihood ofseeking care
averagephysician need
demand formedics by status
demand forphysicians by status
effect of adverseselection
adverse selectionmodifier
switch on adverseselectionHistorical
Fraction ofPopulationEnrolled
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CHI Bangladesh Model Documentation
As the Historical Fraction of Population Enrolled increases, the effect of adverse selection decreases. In essence, the healthier population is less likely to enroll early and only gradually the impact of adverse selection. As the fraction enrolled approaches 100%, adverse selection no longer effects the utilization rate.
The inputs to demand are the average (by age and gender) perceived medical need for physician or medic care, the likelihood of people to seek care based on their insured status, the modification we expect for adverse selection and the historical fraction of enrolled population.
The outputs are demand for physician or medic (nurse) care.
Adverse Selection Effect
effect of adverseselection
adverse selectionmodifier
<fraction of informalworkers enrolled>
HistoricalFraction ofPopulationEnrolled
time to averagehistorical pop enrol
change in histfract pop enrol
switch on adverseselection
The group assumes the possibility of adverse selection: low risk patients opt out of the scheme (or do not join in the first place) with the result that a scheme contains only patients with expensive needs, i.e. above average demand for healthcare. The group further assumes that those with the greatest perceived needs will enrol earliest. Hence, demand per enrolee can be estimated to be highest when enrolment is least, and demand per enrolee will decrease as more people enrol.
To implement these assumptions:
effect of adverse selection[sex] =
( 1
+ adverse selection modifier
* ( 1
- Historical Fraction of Population Enrolled ) )
Units: Dimensionless
Where:
Historical Fraction of Population Enrolled is a simple exponential smooth over 6 months of fraction of informal workers enrolled, and
fraction of informal workers enrolled =
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CHI Bangladesh Model Documentation
insured status[insured] * Primary Enrolment / target enrolment market
Units: Dimensionless
The adverse selection modifier = 1, selected by the group to estimate that earliest enrolment will have twice the needs of the total population.
Therefore, as actual enrolment approaches total potential enrolment, the effect of adverse selection diminishes to zero.
Health Status
PrimaryEnrolment
totalenrollment
time
<primary enrolling> <disenrolling>
averageenrollment time
decreaseenrolment time
gainingenrolment time
rate of gainingenrolment time
<average life spanby sex>
average populationlife span
<total populationby sex>
<population by sexand insured status>
total enrolment time ofinsured population
total populationexperience
<total population>
months perperson per year
fractionalimprovement inmortality rate
effect of improvedhealthcare onmortality rate
max improvement inmortality rate from
healthcare
time to realizeimprovement inmortality rate
switch on improvedmortality rate
The model permits healthcare to affect health status. To approximate this effect, the group assumed that as more of the population maintains membership in the healthcare scheme, the population health status will improve over baseline. To that end, a coflow measures average enrolment time.
PrimaryEnrolment
totalenrollment
time
<primary enrolling> <disenrolling>
averageenrollment time
decreaseenrolment time
gainingenrolment time
rate of gainingenrolment time
<average life spanby sex>
<total populationby sex>
<averageenrollment time>
This structure tracks enrolment and rate of gaining time in the stock, less the number of those who disenrol times the average enrolment time to keep a rolling average, which is applied to the population:
total enrolment time of insured population =
average enrollment time
* population by insured status
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CHI Bangladesh Model Documentation
Units: Month
The result is then compared to the total population experience:
fractional improvement in mortality rate =
total enrolment time of insured population
/ total population experience
Units: Dimensionless
Where:
total population experience =
total population
* average population life span
* months per person per year
Units: Month
The fractional improvement in mortality rate is applied to the insured population in a fixed delay of 60 months:
effect of improved healthcare on mortality rate =
fractional improvement in mortality rate
* max improvement in mortality rate from healthcare
Units: Dimensionless
Where:
max improvement in mortality rate from healthcare = 0.1
Units: Dimensionless
The effect of a more inclusive healthcare system is expected to be more productive work time. That is, actual morbidity is assumed to remain constant but the time away from economic production can increase over the baseline:
informal worker days per month =
initial informal worker days per month
+ max ave productive days gained
* fraction target enrolled
Units: day/(Month*person)
Where:
initial informal worker days per month = 24
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CHI Bangladesh Model Documentation
Units: day/(Month*person)
max ave productive days gained = 2
Units: day/(Month*person)
fraction target enrolled =
Primary Enrolment
/ target enrolment market
Units: Dimensionless
Treatment Capacity
<juvenile demand forphysicians by status>
<fecund demand forphysicians by status>
<mature demand forphysicians by status>
<over 60 demand forphysicians by status>
total physiciandemand by status
fraction of insuredphysician demand met
PhysicianQueuemonthly demand
for physicianreceiving phys
treatment
quitting wait forphysician
<max physiciancapacity>
phys quitting rate
average unmetphysician demand
time to averageunmet demand
average physicianwaiting time
normal physquit rate
fract physiciandemand by status
<under 5 demand forphysicians by status>
time to quitqueue
<fraction of chidemand covered>
The capacity to meet the demand for healthcare is limited or constrained by the number of physicians and nurses. We make no assumption about the severity of medical conditions, but we assume people have a limit to their willingness to wait for care. Thus, as waiting times increase, the number of people who simply quit waiting increases too.
Queue forCare
<demand forphysicians by status>
+
physician visitcapacity
+
receiving treatment
+
-
quitting the queue
+
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CHI Bangladesh Model Documentation
Patients waiting for treatment cannot know how much longer they will have to wait, but they can know how long they have waited. In the model we simulate this by comparing the size of the queue with the number of people currently being treated:
Queue forCare
<demand forphysicians by status>
+
physician visitcapacity
+
receiving treatment
+
-
quitting the queue+
perceivedwaiting time
+
+-
Receiving treatment and quitting the queue have the same effect on the Queue for Care: an increase in either reduces the Queue and future waiting time.
We assume that physician and nurse caregivers do not distinguish between insured and noninsured patients. That is, they allocate their visit time based on the presenting patient. However, demand by insured patients is likely to be greater than noninsured patients (measured patient by patient), so that available capacity will skew to insured patients.
The principal inputs are demand and physician visit capacity. The principal output is receiving treatment.
CHI AttractivenessThe marketplace judges whether a health plan is attractive. In the model, we assume several variables influence that judgement.
People perceive:
the health plan is available – Awareness there is treatment capacity to meet their demand – Availability treatment is within reach – they can get to treatment with ease – Accessibility the health plan is affordable – it does not use too much monthly income – Affordability expenditures to treat their medical conditions will be paid by the health plan – Coverage
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CHI Bangladesh Model Documentation
CHI Awareness
CHI Coverage
CHI Affordability
CHIAttractiveness
CHI Availability
switch on InsuranceAttractiveness function
BankAttractiveness
Weight on BankAttractiveness
InsuranceAttractiveness
We add one more element of attractiveness: Bank Attractiveness. That is, our plan is connected to a bank that offers e-payments by telephone text. The members make small monthly deposits to savings that permit them to borrow money for approved needs. The Bank may be highly attractive if it offers low cost loans, above-market savings rates, and financial stability.
Inputs include advertising impact, physician and nurse demand met, relative distance to treatment, portion of monthly income expended for premiums, and portion of medical conditions covered.
Outputs affect market size and enrolment, and in the case of the bank, membership in the bank customer community.
Expenditures Per Member Per Month
physician visit price
<receiving nursetreatment>
<receiving phystreatment>
nurse visit price
nurse visitclaims BDT
physician visitclaims BDT
total visit claims
enrolmentwaiting period
physician nurseprice ratio
initial physicianvisit price
total claims paid
<fraction ofclaims denied>
The principal expenditures per member are the sum of monthly visits to care venues times the prices charged for each visit:
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CHI Bangladesh Model Documentation
total visit claims =
nurse visit claims BDT + physician visit claims BDT
Units: BDT/Month
Where:
nurse visit claims BDT =
nurse visit price
* receiving nurse treatment[insured]
Units: BDT/Month
physician visit claims BDT =
physician visit price
* receiving phys treatment[insured]
Units: BDT/Month
Claims Processing
<receiving nursetreatment>
<receiving phystreatment>
<enrolmentwaiting period>
claims per visit
ClaimProcessors
ClaimsAwaiting
Processingtotal claims made claims processed
time to processclaims
expected claims
forecast horizon
claim averagingtime
hiring and trainingclaim processors
claim processorsleaving
average claimprocessor career
claims processorproductivity
time to hire and trainclaim processor
pending claims
fraction ofclaims denied
PendedClaimspended claims
resubmitted
time toprocessappeal
fract claimsresubmitted
pended claimsdenied
desired claimsprocessors
<pending claims>
normal claimsprocessor productivity
effect of automatedclaim processing
Health plans provide structure to the health care system. Not every expenditure claimed as a covered expense is covered by the plan. Some noncovered expenditures include certain illnesses, say, very costly cancers or very common upper respiratory tract infections. Claims are usually submitted for payment by the provider and contain date of rendered service, identification of the insured person, a description of the condition and service provided, and amount of the claim. The claims are bundled by provider and the covered claims are paid.
The processing of claims can be entirely manual or electronically assisted. In large plans, claims are submitted electronically and processed without intervention by a claims processor. This automated claims processing is very inexpensive but can be prone to erroneous payments to providers. The question is whether the cost of auditing many claims is less than the amount that would be saved by catching overbillings.
Unacceptable claims are “pended”, meaning the provider is told the claim will not be paid without additional justification. This is a relatively time-consuming process because the human intervention
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CHI Bangladesh Model Documentation
is extensive. Some pended claims will be reprocessed and paid; some pended claims will not be pursued by the provider.
In considering the claims processing function, processor productivity is influenced by electronic assistance such as automated claims processing. The denial rate influences the number of times a claim will circulate through the system before it closes.
ClaimProcessors
ClaimsAwaiting
Processing
PendedClaims
claims made
+
claims processed+
claim processorproductivity
+ +-
pendingclaims
+
+-
-
resubmittingclaims
+
+
forecasted claims
+
-
+
pended claimsdenied
+-
denial rate
+
Principal inputs include claims made, claim processor productivity and claims denial rates.
The output is claims processed.
Monthly Premium
claim processormonthly wages
general andmarketing expense
CBHI
general expensemultiple
medical costreserve
<population by sexand insured status>
indicatedpremium pmpm
GeneralExpensechg gen exp
time to chg gen exp
<month to startchi initiaitive>
<Time>
time over which tochange forecastedmonthly premium
ForecastedMonthly Premium
premium forecasthorizon
MonthlyPremium
Computedchange in monthlypremium
<ClaimProcessors>
<CHI advertisingbudget>
<total claims paid>
Monthly Premiumfor Game
<switch on MonthlyPremium for Game>
Monthly Premium
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CHI Bangladesh Model Documentation
To breakeven the monthly premium covers medical and administrative costs. The challenge facing any healthcare plan is to set a stable premium in advance of incurring those expenses and hold that rate constant for a year. Health plans employ actuaries to analyze historical expenditures and guess at which trends will dominate in the coming year.
Our model simulates that activity by accumulating medical, general and administrative expenses that indicate a monthly premium which is then analyzed for its trend over time. The trend-adjusted monthly premium is then projected over a time horizon that represents how confident the forecaster is that trends will continue.
indicated medicalcosts pmpm
<nurse visitclaims BDT>
<physician visitclaims BDT>
claim processormonthly wages
general andadministrative
expensemedical costreserve
indicatedpremium pmpm
GeneralExpense
ForecastedMonthly Premium
premium forecasthorizon
MonthlyPremium
<ClaimProcessors>
Inputs are claims from medical practice, claims processor wages paid and general expenses of running the business. The output is the monthly premium.
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CHI Bangladesh Model Documentation
Insurance Firm Accounts
CBHI Cash
monthly premiums
interest earnedCBHI
CBHI P and L
CBHI ShortTerm
Investments orBorrowing
<population by sexand insured status>
<investmentearning rate>
target cash CBHI
CBHI cash reserve
Change in STinvestments or
borrowing time in which toinvest st cbhi
<monthlypremiums>
<interest earnedCBHI>
<general and marketingexpense CBHI>
<general and marketingexpense CBHI>
Initial Equity CBHI
<total visit claims>
total claims paid
<fraction ofclaims denied>
<total claims paid>
<monthlyinsurance income>
<switch onInsurance Initiative>
<MonthlyPremium>
Accounting for health plan operations is relatively simple, although companies in the industry use sophisticated management tools to maximize invested sums.
CBHI Cash
CBHI interest earned
Change in ST investments
general and administrative expense
Initial Equity
monthly premiums
total claims paid
monthly insurance income
CBHI interest earned
general and administrative expense
monthly premiums
total claims paid
The principal outputs are monthly insurance income, Cash and Short-term Investments.
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CHI Bangladesh Model Documentation
Microfinance Structure
Bank ShortTerm
Investments
Bank Cash
<lending>
<depositing>
<repaying>
<withdrawals>
<interest earnedbank>
<administrativeexp bank>
Initial Equity bank
change ininvestments
time to changeinvested cash
target cash
cash reserve ratio
<Bank Deposits>
<switch on BankInitiative>
Banks are boxes of cash coming in and going out. The accounts reflect those flows.
Inputs:
Bank Loans
lending
loans defaulting
repaying
Bank Deposits
deposit interest accrued
depositing
withdrawals
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CHI Bangladesh Model Documentation
Bank Cash
interest earned
administrative exp
cash reserve ratio
change in investments
depositing
initial equity investment
lending
repaying
withdrawals
Deposits may be mandatory for membership, and that is a choice yet to be made.
depositingpopulation participating in microfinance
savings rate
Outputs include loan defaults and equity that influence the Bank’s Reputation.
Bank ReputationBank Equity
loans defaulting
Bank AttractivenessBank Attractiveness is represented by perceived Awareness, Accessibility, Affordability and Reputation.
Awareness is a function of advertising and the word of mouth in the Health Plan. Accessibility is measured as the number of bank locations relative to the number of customers. Affordability is measured as the interest rate spread in its loans. Reputation is a function of loan defaults and the Bank Equity.
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CHI Bangladesh Model Documentation
Bank Awareness
Bank Reputation
Bank Affordability
BankAttractiveness
<loans defaulting>
<BankEquity>
<interest ratespread>
Bank Accessibility
bank locations
Inputs are target market awareness, bank locations, loan interest rate spread, loan defaults and bank equity:
Bank Attractiveness =
Bank Accessibility
* Bank Affordability
* Bank Awareness
* Bank Reputation ,
Units: Dimensionless
Where:
Bank Reputation =
MAX (loans defaulting /
Bank Equity ,
0) ,
Units: Dmnl
Bank Affordability =
f( interest rate spread) ,
Units: Dimensionless
Bank Accessibility =
f( bank locations
/ max bank location density)
Units: Dimensionless
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