Table 3 Mean (predicted) spending in euros under risk equalization without a high-risk pool, the threshold for compensation and the percentage of total costs needed to finance the high-risk pool for five different pool sizes (i.e., top-1% to top-5% of predicted residual spending)
High-risk pools based on predicted residual spending from the random forest model | |||||
|---|---|---|---|---|---|
Top 1% | Top 2% | Top 3% | Top 4% | Top 5% | |
Mean spending | 12,730 | 10,826 | 10,097 | 9571 | 9280 |
Mean spending predicted by the risk-equalization model | 10,371 | 9320 | 8755 | 8440 | 8194 |
Threshold | 12,961 | 18,066 | 20,408 | 23,706 | 23,807 |
HRP financing costs as percentage of total spending in test sample | 0.96% | 1.2% | 1.6% | 1.8% | 2.2% |