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Capitation funding in the public sector

Smith, P.C., Rice, N. and Carr-Hill, R. (2002) Capitation funding in the public sector. Journal of the Royal Statistical Soceity: Series A (Statistics in Society), 164 (2). pp. 217-257. ISSN 0964-1998

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Abstract

A fundamental requirement of government at all levels—national and local—is to distribute the limited funds that it wishes to spend on particular public services between geographical areas or institutions, which are effectively competitors for such funds. Increasing use is now being made of capitation methods for such purposes, in which a standard estimate of expected expenditure is attached to a citizen with given characteristics. Statistical methods are playing an important role in determining such capitations, but they give rise to profound methodological problems. This paper examines the rationale for capitation and discusses the associated methodological issues. It illustrates the issues raised with two examples taken from the UK public sector: in personal social services and hospital care. Severe limitations of the data mean that small area data are used as the unit of observation, giving rise to considerable complexity in the model to be estimated. As a result, a range of methodologies including two-stage least squares and multilevel modelling methods are deployed. The paper concludes with a suggestion for an approach which would represent an improvement on current capitation methods, but which would require data on individuals rather than on small areas.

Item Type: Article
Institution: The University of York
Academic Units: The University of York > Centre for Health Economics (York)
Depositing User: York RAE Import
Date Deposited: 02 Apr 2009 14:07
Last Modified: 02 Apr 2009 14:07
Published Version: http://dx.doi.org/10.1111/1467-985X.00200
Status: Published
Publisher: Blackwell Publishing
Identification Number: 10.1111/1467-985X.00200
URI: http://eprints.whiterose.ac.uk/id/eprint/6940

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