Analysis & Commentary
ANALYSIS & COMMENTARYBeyond Capitation: How New Payment Experiments Seek To Find The ‘Sweet Spot’ In Amount Of Risk Providers And Payers Bear
- Austin B. Frakt ( [email protected] ) is a health economist with Health Care Financing and Economics at the Veterans Affairs Boston Healthcare System, an assistant professor of psychiatry at the Boston University School of Medicine, and an assistant professor of health policy and management at the Boston University School of Public Health, in Massachusetts.
- Rick Mayes is a faculty research fellow at the Petris Center on Healthcare Markets and Consumer Welfare, University of California, Berkeley; and an associate professor in the Department of Political Science, University of Richmond, in Virginia.
Abstract
A key issue in the decades-long struggle over US health care spending is how to distribute liability for expenses across all market participants, from insurers to providers. The rise and abandonment in the 1990s of capitation payments—lump-sum, per person payments to health care providers to provide all care for a specified individual or group—offers a stark example of how difficult it is for providers to assume meaningful financial responsibility for patient care. This article chronicles the expansion and decline of the capitation model in the 1990s. We offer lessons learned and assess the extent to which these lessons have been applied in the development of contemporary forms of provider cost sharing, particularly accountable care organizations, which in effect constitute a search for the “sweet spot,” or appropriate place on a spectrum, between providers and payers with respect to the degree of risk they absorb.
