On the research status of risk-adjusted capitation rates

Capitation as an alternative to traditional charge and cost reimbursement has been a serious policy issue since at least 1970, and is currently one of the most seriously debated and far-reaching health issues before Congress. Nonetheless, the research effort on risk-adjusted per capita payment has been meager. In this overview, the author points out the pitfalls of prior utilization as a basis for capitation rates. He suggests instead that a capitation risk adjustment system be developed that eliminates cost variation resulting from patient risk but not that resulting from provider inefficiency, and that risk values across groups be normalized to prevent "risk group creep" and to ensure budget neutrality. He concludes that because obstacles were overcome in developing the current per admission DRG system for Medicare, the same can be done for a capitation system, and makes specific suggestions for doing so.