First, physicians have no financial incentive to limit care. If anything, a physician has financial incentives to do more than might be necessary. But second, because insurance diffuses a physician's charges among all policyholders, an individual consumer pays little attention to the possibility that a physician will overcharge or overtreat. Third, free choice of provider permits consumers to seek alternative physicians or providers if they fear that particular providers are not looking out for their best interests. Managed care has undermined these mechanisms to a great extent.
Capitated payments create financial incentives for health care providers to skimp on care.
In addition, managed care plans have reduced consumers' ability to choose their own providers. Opinion polls show a fairly conisistent story that consumers see managed care organizations as setting restrictions on their choice of provider and on their options for medical care. Consumers also seem to be well aware of the financial incentives for managed care organizations to delay or to stint on medical care. The result has been a dramatic loss in consumer trust of physicians and other health care providers in managed care organizations. It may well be that relying on capitated payments to providers to restrain the provision of unnecessary health care, and limiting the network of providers in a managed care plan, are antithetical to maintaining consumer trust in physicians and providers.