Definition - What does Capitation mean?

Capitation is a system of health insurance payments in which health professionals are paid fixed amounts per month based on the number of insured people they have as patients. It disregards how often a qualified person goes to the professional for health services.

Insuranceopedia explains Capitation

The purpose of capitation is to lessen the cost of health services by determining the monthly amount in advance for a year. This payment is fixed by a contract between the insurance company and the medical provider.

To prevent the medical provider from being underpaid, qualified people are classified according to risk. For instance, those who are diabetic and, therefore, require regular treatment might be enrolled in one risk pool. Your assignment to a risk pool might also be determined by factors like your age.

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