Question

What do you see as the advantages or disadvantages of a capitation system versus the managed care/insurance reimbursement model. Look at the advantages and disadvantages from (1) the consumer, (2) the provider, and (3) the employer. You might look at Kaiser-Permanente as an example of a large capitation system.

Answer 1

Advantages of Capitation

There are advantages and disadvantages of capitation, just like in any health care payment system. Some of the advantages are intended to reduce costs and increase quality of care:

• Managing a capitation system can be easier and more cost effective because the only thing to keep track of are the number of enrolled members. There is no need to use complicated billing codes or to fill out involved paperwork or claims.
• Cash flow is more predictable for providers, and members have more predictable health care costs. Budgeting is easier when you know how much money is coming in or going out.
• Preventative care is a strong focus because it is more cost effective for providers than treating complex and chronic health issues later. This could be better for members who might experience increased health over the long haul.

Disadvantages of Capitation

While the capitation system has its advantages and can sometimes help to keep costs down, it is not without its faults. Some people have concerns about potential disadvantages:

• Patient choice is restricted. If you love your doctor, but she leaves the network, you have no choice but to choose another primary care provider or pay out of pocket. You must also obtain a referral before seeing a specialist or undergoing a procedure. If your primary care provider disagrees with your concerns, you might be denied a referral, leaving you without the care you desire.
• The capitation system can sometimes encourage providers to take on more patients than they can realistically care for, in order to increase their salaries. This means that time with the doctor could become very limited and appointments could involve waiting longer than you'd like. It also means that providers are more likely to feel stressed and hurried as they rush from patient to patient.
• Providers may become stingy with care, choosing not to order potentially helpful tests and procedures in order to keep costs down and profits up. This leads to a stressful work environment for providers and can cause patients to suffer or feel helpless in seeking the care they need.

• Unnecessary interventions, tests and care are limited because physicians are looking to keep costs down in order to maximize their profits. Patients do not need to be as concerned about paying for extra tests or procedures that are not truly needed.