Problem · Problems created by solution paths

Paying a fixed amount per patient rewards doing less

Capitation and bundled payments remove the incentive to over-treat, but create an incentive to under-treat, avoid sick patients, or refer costly cases elsewhere.

Evidence

Medicare Advantage plans deny some prior-authorization requests that would be approved under traditional Medicare.
Sources: Medicare Payment Advisory Commission (2025)

Who's affected

Who is hurt

People with ongoing or specialist care needs: Fixed payments encourage avoiding sick patients or providing less care.

Who gains while it lasts

Hospitals, clinics, and care organizations: They keep the difference when care costs less than fixed payments.
Health insurers, brokers, and their shareholders: They keep the difference when care costs less than fixed payments.

Under your mix of paths

Paths that create or worsen it

Paths that fix or soften it

Using your saved plan. 0 paths picked.Edit all picks

Root causes

Fixed payment regardless of care delivered

Open questions

How should quality and access be monitored under fixed payments?

Caused or worsened by these paths

This problem only matters if one of these paths is chosen.

Global budgets for hospitalsU.S. prices are far higher than in other countriesChosen

An annual operating budget creates an incentive to do less care or delay elective services.

Capitation for primary care and integrated systemsU.S. prices are far higher than in other countriesChosen

Fixed payments per enrolled person create incentives to avoid sick patients or under-treat them.

Let people choose among public care organizationsLosing the choice of health plan and insurer competitionChosen

Paying the competing care organizations by capitation retains the risks associated with that payment method.

Solution paths (3)

Open a path for what it fixes, what it creates or worsens, who gains and who loses, precedents, and how it connects to other paths. See all paths as a decision tree.

Risk adjustment plus outcome monitoringChosen

Pay more per patient for sicker patients, ban patient selection, and monitor access and outcomes publicly.

+Paying a fixed amount per patient rewards doing less

−Adds paperwork, coordination, or complexity
−Targets and quality metrics invite gaming

Blended payment: part capitation, part fee-for-serviceChosen

A per-patient payment covers basic care and a fee per service rewards doing more for patients who need it.

+Paying a fixed amount per patient rewards doing less

−About $1 trillion a year in administrative cost
−Adds paperwork, coordination, or complexity

Salaried clinicians in public or non-profit groupsRejected

Clinicians are paid salaries, so there's no direct financial reason to do more or less.

+Paying a fixed amount per patient rewards doing less

−Weakens incentives for desired behavior
−Limits choice or applies one rule to every setting