An analysis of the financial incentives provided by a capitation-based resource allocation system within the Military Medical Department

Abstract

This thesis analyzes whether a capitation-based resource allocation system will provide the incentives necessary to pursue or provide quality, cost- effective care within the Military Medical Department. To answer this question, capitation budgeting and its salient characteristics were defined. Then, the risks and incentives associated with capitation budgeting were compared against other budgetary methods. Subsequently, the civilian sector's experience with prepaid, managed care plans was analyzed, focusing on the incentives to the various health care players. It also questioned whether the quality of care has been effected. Next, the study drew on civilian sector experience to evaluate the potential impact of incentives on various players in the Military Health Services System. The study concludes that a capitation-based resource allocation system will provide the various players in the military health care arena with the proper incentives to provide quality, cost-effective care.