Question

In this module, you were introduced to the different methods for reimbursing physicians: Fee-for-Service and Capitation. Fee-for-service structures can be an incentive for over treatment; whereas capitation payments can be an incentive to underserve. In your opinion, from an ethical standpoint, which method of payment is more appropriate? Why do you feel this way?

Answer 1

Ans) Capitation and fee-for-service (FFS) are different modes of payment for healthcare providers. In capitation, doctors are paid a set amount for each patient they see, while FFS pays doctors according to what procedures are used to treat a patient. Both systems are in widespread use in the U.S. healthcare system, but FFS has been in decline over the past decade.

- The traditional system of health care is that of fee-for-service. A patient visits a doctor or healthcare facility, is evaluated and treated, and pays for what was done. Capitation arises as a form of insurance for groups of people, with the intent of spreading exposure (risk) of health care, thus reducing the average individual cost per patient. In the U.S., health care paid for without private insurance remains primarily based on FFS, with health insurance plans, including those created under the Affordable Care Act, relying mainly on capitation.

- Over the past decade, capitation has become the preferred form of providing health care payments for medical and health plans. Medicaid has been using capitation as its base system since the 1970s, though aspects of the plan, such as mental health treatments and dental care, remained as FFS. Large insurance companies moved away from FFS systems because the rising costs of lab tests, diagnostic procedures, and medication were severely curtailing profits.