Capitation and Risk Adjustment in Health Care Financing: An International Progress Report

In every system of health care, capitation payments have become the accepted tool used by health care purchasers in much of the developed world to determine prospective budgets. The policy prescription of capitation is perceived to address both equity objectives (of great importance in publicly funded systems of health care) and efficiency objectives (the dominant concern in competitive insurance markets). An examination of the current state of the art in 20 countries outside the United States in which health care capitation has been implemented confirms that capitation has assumed central importance within diverse systems of health care. In practice, however, the setting of capitation payments has been heavily constrained to date by poor data availability and unsatisfactory analytic methodology.