Health Insurance Articles

What Is A Capitation

2010-01-15

Having the right type of health insurance coverage can make all the difference when an illness or critical incident strikes. Health care plans are many and varied, each with their own particular ins and outs. Additionally, each policy has their own benefits depending on the needs of the consumer using them. One type of health insurance policy that is common under a Health Maintenance Organization or "HMO" is one that features the idea of capitation.

HMOs will typically have a list of service providers and physicians that are covered by the plans they offer. Under a capitation system, the HMO will pay the client's physician a set amount of money for a fixed period of time, for example one quarter of a year. This money is paid to the physician by the HMO regardless of whether or not the patient ever uses the doctor's services within that time period. A physician will receive a payment for every person enrolled in the HMO's plan. The amount paid to the doctor is dependent on the estimated use of the health care system by the client. This estimate is based on factors such as age, current level of health and any preexisting conditions.

This health insurance capitation model differs from a more traditional pay-for-service model in that no matter how many or how few services a client uses, the amount paid to the physician remains the same. This means that the amount paid by a client to their health care insurer will be consistent over time, allowing for a more long-term health care budget to be developed Questions have been raised, however, about how motivated doctors will be to prescribe treatments or issue prescriptions outside the bare minimum of care in order to maximize their own profits. Each extra treatment or allotment of time the doctor assigns or spends with the patient means that the amount of profit they are receiving from their fixed payment goes down.

In general, a health insurance policy that uses capitation as its payment method tends to involve doctors that are more reliant on preventative medicine, and less willing to use new, experimental procedures with a higher cost but only slightly higher success rates. This is compared with the fee-for-service model, in which there can be a tendency for doctors to over-prescribe or over-treat in order to drive up costs. If a patient is relatively healthy and prefers to focus on what can be done to maintain current health, rather than treat or over-treat problems that may crop up along the way, a system that uses capitation as its core payment mechanism may be the best choice for them.