A preimplementation assessment of a capitation reimbursement system using simulation

Capitation is a system of reimbursement for services under which providers are paid a fixed amount per client served per time period. An experiment from April 1981 to December 1981 involved the use of a capitation system of reimbursement to pharmacies participating in the Iowa Medicaid drug program in 32 counties in Iowa. It was essential to demonstrate that cost savings were feasible and pharmacy reimbursement would be adequate before the capitation experiment was begun. An assessment of this issue was developed using simulation and data base management techniques. The positive results of this assessment gave evidence that cost savings due to capitation potentially could be realized by both the Medicaid drug program and pharmacists during the experiment.