Policy Considerations in Implementing Capitation for Integrated Health Systems (Executive Summary only)

by Jeremiah Hurley, Brian Hutchison et al. | Jun 01, 1998

Executive Summary

This report is intended to guide Canadian policy makers in designing capitation funding for integrated health systems (IHSs). It is based on a synthesis of research evidence and on the experiences with capitation funding in a number of jurisdictions. Capitation funding refers to the allocation of monies from a provincial or regional government to an IHS through fixed, pre-specified payments per time period for each enrollee of the IHS. Because the IHS does not receive additional payments if it provides additional services to an enrollee, the IHS assumes financial risk associated with meeting enrollees’ health needs. Like all funding methods, capitation creates incentives for both desirable and undesirable behaviour by IHSs. On the positive side, capitation funding gives an IHS incentive to provide only effective services, to produce those services efficiently, and to use them efficiently to enhance enrollees’ health. On the negative side, capitation funding gives an IHS incentive to under-provide services (reducing quality of care) and to selectively enroll individuals with above-average health (potentially creating problems of access for high-risk individuals).