What is capitation?

Capitation is a payment arrangement in which a payer gives a broker or health plan a fixed amount per enrolled member per month (PMPM) to cover a defined benefit, no matter how much of it members actually use. Most state-to-broker NEMT contracts are capitated: the broker keeps the difference if trips cost less than the capitation revenue and absorbs the loss if they cost more.

Why capitation matters for NEMT

Capitation explains broker behavior. Because the broker's margin is the gap between fixed revenue and variable trip costs, brokers are motivated to negotiate low per-trip rates, favor shared rides, push ambulatory trips to lower-cost modes and scrutinize mileage. Understanding that your broker is managing a capitated risk pool helps you negotiate: reliability, on-time performance and low complaint rates lower the broker's costs and are worth paying for.

Related terms

• Managed Care Organization (MCO)
• Fee-for-Service Medicaid
• NEMT Broker
• Private Pay
• Medicaid