Balancing incentives. How should physicians be reimbursed?

The May 15, 1991, JAMA theme issue presented 14 different proposals for reforming the US medical care system. Though these proposals varied widely, they encompassed only three proposed methods for paying physicians: fee-for-service, salary, and capitation. When examined from a perspective that considers the incentives affecting practicing physicians, each of these methods has serious flaws. I outline these flaws and suggest an alternative method for reimbursing primary care physicians: that of combining capitation and fee-for-service. Specialists would be paid fee-for-service, but the cost of specialty care would be limited by giving each primary care physician a budget for such care. Consistent failure by a physician to stay within the budget would result in ongoing review, but not in direct financial sanctions. This system of reimbursing physicians is intended to balance incentives so that physicians can concentrate on making medical decisions with a minimum of distraction by third parties and by personal financial considerations.