In health insurance/health policy is a payment system where doctors, medical groups or insurance providers are paid a fixed fee per patient. Which, depending on the circumstances can be a good thing or a very bad thing indeed.

An Ohio Pediatrician, commenting on the post Squaring the Circle captures the bad side of capitation well:
Small practices lost money because of small panel sizes, put more at risk if there was even one catastrophically ill patient.

One problem with the current system is that patient "risk" is the cumulative effect of lifestyle, environment, education, behavior, and previous health care experience. Improving health care outcomes means that all of the factors determining health must be addressed, and good outcomes for the general population will take at least one generation or 30 years. The current insurance system, including capitation, divides health risk into annual increments, with patients being tossed around like hot potatoes so that no one system is "stuck with" the high-risk patient.
Wonks Anonymous can only agree that capitation as it is now practiced by the insurance model HMO - the model of HMO that most of us know - is an awful system. Insurance companies present individual doctors and small practices with "take it leave it" contracts. The capitation rates are low even for the healthy and, because the doctor is paid a fixed fee per patient, he or she also takes on the risk that the insurance company should be bearing.

Here, do my job and your job for lower pay. Isn't it grand how much money we are saving!

But this arrangement is as much a matter of the relative bargaining power of the parties involved. One big insurance company, lots of little doctors. The doctors don't do so well. In other cases capitation is a very generous system. Medicare currently pays private insurers about 14% more per person than its average costs. A few big insurance companies, big campaign contributions and lots of small minded politicians. The insurance companies are quite comfortable.

Back to the post. Wonks Anonymous was not advocating capitation as a universal system. He would like to see health insurance handled by a single payer or universal Medicare system. He would like to see risk adjusted capitation as one payment option in this system. This would enable some doctors - those who belonged to large medical groups that were accustomed to operate on a capitated basis - to continue their practice as before. All evidence indicates that this form of practice is both effective and economical.

And we should have no illusions that going to a single payer system will eliminate all pressures to spend less and cut back on medical payments. Doctors will still need to bargain with the government as they have bargained with insurance companies. In these circumstances they will do better if they organize into larger groups.

No matter what happens, we will see coordinated action by doctors, hospitals, clinics and other health care providers. In their organizations providers can form unions that are mainly concerned with bargaining over payments and working conditions or they can form cooperative organizations that also take on issues of the production and organization of medical care.

Wonks Anonymous has nothing against unions. He thinks that in this particular case we will do better with producers cooperatives.


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