A representative sampling plan for auditing health insurance claims

Abstract

A stratified sampling plan to audit health insurance claims is offered. The stratification is by dollar amount of the claim. The plan is representative in the sense that with high probability for each stratum, the difference in the average dollar amount of the claim in the sample and the average dollar amount in the population, is ``small.'' Several notions of ``small'' are presented. The plan then yields a relatively small total sample size with the property that the overall average dollar amount in the sample is close to the average dollar amount in the population. Three different estimators and corresponding lower confidence bounds for over (under) payments are studied.