In terms of incentives, which statement correctly contrasts capitation with fee-for-service?

In terms of incentives, which statement correctly contrasts capitation with fee-for-service?

• A. Capitation pays a fixed amount per patient per period regardless of services; FFS pays per service; capitation incentivizes efficiency, FFS incentivizes volume.
• B. Capitation pays per service; FFS pays per visit;
• C. Capitation pays a fixed amount per patient per period; FFS pays a fixed amount per patient.
• D. Capitation is only for hospitals.

Answer: (A)

The main idea is how payment shapes provider behavior: capitation gives a fixed amount per patient per period, regardless of how many services are used, while fee-for-service pays for each service delivered. This makes capitation incentivize efficiency and cost containment—providers keep costs down and focus on coordinating care and prevention to stay within the fixed budget. Fee-for-service, on the other hand, rewards delivering more services, so it tends to incentivize higher volume of care and more testing or procedures. The other descriptions don’t fit: capitation isn’t paid per service, fee-for-service isn’t fixed per patient, and capitation isn’t limited to hospitals.

The main idea is how payment shapes provider behavior: capitation gives a fixed amount per patient per period, regardless of how many services are used, while fee-for-service pays for each service delivered. This makes capitation incentivize efficiency and cost containment—providers keep costs down and focus on coordinating care and prevention to stay within the fixed budget. Fee-for-service, on the other hand, rewards delivering more services, so it tends to incentivize higher volume of care and more testing or procedures. The other descriptions don’t fit: capitation isn’t paid per service, fee-for-service isn’t fixed per patient, and capitation isn’t limited to hospitals.