Building Health System Models for Policy Development

Instructor: Alexandra Unfried

Alexandra earned her master's degree in nursing education and is currently a hospital supervisor/administrator.

Health system models guide policy development by comparing groups, characteristics, and behavior. This lesson will discuss the use of three types of structures used in simulation modeling to develop health policy.

Policy Development

Karen works in Virginia's Department of Health. She is working with her office to determine the effects of making a change in how insurance is offered for home health services through Medicare. She wants to use a simulation model to see how the changes will affect costs and availability of home health services. Karen begins to review the different types of simulation models that she can use, so she can choose the most effective one.

Simulation Modeling

Simulation modeling is the process used in the development of health policy. It offers measurable assessments of the cause and effect relationship of a policy change by providing different outcome measures. Simulation models also help identify unanticipated effects of a change in policy as well as the reaction the change will have on specific populations.

Karen wants to see how bundling home health insurance with a delivery prescription and medical equipment plan will affect the cost and usage of the service for Medicare recipients in Virginia. There are three different models that she is reviewing to determine which one she will use.


A microsimulation model looks at individuals or groups of people, their characteristics, and what changes in behavior may occur when health policy is manipulated. ''Agents'', or the people involved in the simulation, commonly consist of individuals, groups, health care providers, government, and insurers. Attributes, or characteristics, include things such as age, income, insurance status, and medical history. Behavior is the result of how the health reform is received and how it affects the agent based on their attributes.

Karen quickly sets up her health policy into a microsimulation model.

  • Agent: Medicare recipients who require home health services
  • Attributes: age of recipients, type of Medicare they receive, income, location
  • Behavior: bundling home health services with a delivery program for prescriptions and medical equipment, and how it affects cost and feasibility

Karen thinks that this particular model might be a bit complicated, but will provide an efficient amount of outcome measures to review. Information will come from household surveys and will show how Medicare recipients will react to changes in services and costs that the health policy will bring. She continues to look at the other types of models.

Individual Choice

An individual choice model is similar to microsimulation. It accounts for each individual and compares the insurance options in order to provide the best selection for each person. The individual choice model offers choices to people about how and when services are provided to them.

Individual choice accounts for individual patient needs
Individual choice accounts for individual patient needs

Karen applies individual choice to her health policy which places individual Medicare recipients into a category where they will choose what type of home health service they need, how they receive their prescriptions, and what type of medical equipment they want. While this type of model will provide people with exactly what they need, it appears more complicated than microsimulation and may increase the costs of insurance or out of pocket costs. She moves onto the last health system model.


A cell-based model places people into cells based on their similar characteristics and behaviors. This model estimates the rate that people use different insurance coverage according to groups of individuals based on the type of coverage they are eligible for. Policy changes typically cause people in their cells to migrate to other cells based on insurance coverage.

Karen places Medicare recipients with physical therapy needs in one cell and then sees what other types of home health services they need. This then moves them into different cells, so it can determine how many services are required by different people.

Health System Model Parameters

Each of these models follows similar parameters in order to describe the people or groups, and their behavior. Parameters include:

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