Setting capitation payments in markets for health services.
Ellis, Randall P
Date of Pub
McGuire, Thomas G
Health maintenance organizations (HMO's) are paid a capitated amount for enrolled Medicare beneficiaries that is 95 percent
of what these enrollees would be expected to cost in the fee-for-service sector. However, it appears that HMO enrollees are
less costly than other Medicare beneficiaries. With a simulation model, we demonstrate that with a 95-percent pricing rule,
any significant degree of biased selection leads to increased cost to the payer, even when HMO's are cost effective compared
with the fee-for-service sector. Optimal pricing percentages from the point of view of cost minimization are considerably
less than 95 percent.
Capitation Fee : Fees and Charges : Costs and Cost Analysis : Health Maintenance Organizations/economics : Medicare/economics
: Models, Theoretical : Rate Setting and Review/methods : Risk : Statistics : Support, Non-U.S. Gov't : Support, U.S. Gov't,
Non-P.H.S. : United States : United States Health Care Financing Administration