Capitation is one of the ways insurance companies pay health care providers. Instead of the traditional fee for service payments, providers contract with an insurer to provide care for a patient for a fixed amount. They receive this amount whether the patient uses their services or not. Some providers belong to a group that negotiates for the fees. This is called global capitation since the insurer pays one large amount to the group and then the groups pays the providers directly.

Health insurance companies are proponents of this arrangement because they feel that it controls costs since health care providers are less likely to order unneeded care if they won't be paid extra for those services. The amount of the fee is determined by the demographics of the patients. Statistics that show many covered patients won't need care during a certain time period and other patients will require care then average. These two kinds of patients should average out paying the provider fairly for their services.

Capitation should encourage doctors to focus on preventative care for their patients. If a physician can get a patient to stop smoking or control your diabetes then he is less likely to have to provide additional care for that patient.

Some physicians are proponents of this system of payment because they get payment up front giving them capital to improve their practices. They also have less administrative cost because they do not have to file a claim for each service provided.

There is evidence that capitation does lower the number of procedures performed and overall health costs. The debate is about the cost to patients and physician in order to gain those savings for the insurance company.

Some critics of this system feel that it puts too much of the risk on the health care providers. It may discourage a physician from providing the level of care that they would if they were being paid per procedure. Providers in a capitation system may want to provide good care but they financial gain conflicts with the well being of their patients. There are also incentives to choose patients who are lower risk and to avoid high risk patients who need more care thus limiting access to those patients. There are rules in place to prevent this but they can be circumvented by other means like by practicing in a more upscale area.

Another criticism is that these kinds of payments undermine the trust between a physician and the patient. In the past patients felt their doctor was on their side to advocate for them with the insurance company. From the patient's perspective the physician may not have switched teams.