Capitation and fee-for-service dental benefit plans: economic incentives, utilization, and service-mix

Insurance carriers, corporations, and labor groups are actively developing and marketing dental capitation benefit plans. Incentives to both dentists and patients in these plans differ from those in the traditional fee-for-service system used with conventional benefit plans. This paper describes the likely effects of these incentive differences on utilization and service-mix patterns in both systems. Data for a large (approximately 10,000), homogenous group of subscribers are presented and discussed. Faced with a dual option, at no cost to the employee, 60% of the subscribers chose the fee-for-service plan, and 40% chose the capitation plan. Observed differences in the utilization and mix of services between the two plans cannot be explained solely in terms of dentists' responses. Employee response to altered economic incentives appears to be strong.