When we start buying medicine the way we buy cars, we will have arrived. That s because consumers have no ownership of the cost of health care, he said, so they don t have a financial incentive to pursue cost-saving preventive care. That could change under a defined-contribution plan. As aging baby boomers require more medical care and technology expenses grow, costs are rising for managed-care plans. As a result, some industry analysts say the tools of managed care, such as capitation and financial incentives, are no longer effective in controlling costs.
Capitation is the insurance company practice of paying providers a set rate per member per month.
The rate does not change no matter how many times a member seeks medical treatment or the cost of treatment. Capitation can also include factors that may be beyond the physicians control, such as hospitalization and prescription drug costs. Financial incentives are bonuses awarded to doctors for various reasons, primarily for keeping certain health care costs down. The issue of whether capitation and financial incentives are proper or whether they create a conflict of interest for physicians may be decided by the U.S. Supreme Court, which is considering the case of a woman who blames her health maintenance organization for inadequate care that led to a burst appendix. In the case, Pegram vs. Herdrich, the plaintiffs argue that doctors had a conflict of interest due to the HMO s financial incentives.