American Journal of Public Health, Vol 90, Issue 12 1861-1865, Copyright © 2000 by American Public Health Association

JOURNAL ARTICLE

The effect of capitated financing on mental health services for children and youth: the Colorado experience

R Catalano, A Libby, L Snowden and AE Cuellar
School of Public Health, University of California, Berkeley 94720, USA. raye@uclink2.berkeley.edu

OBJECTIVES: This study tested 2 propositions concerning the effect of capitated financing on mental health services for Medicaid-eligible children and youth in Colorado. The first is that capitation reduces costs. The second is that shifting providers from fee-for-service to capitated financing will increase their efforts to prevent illness. METHODS: Interrupted time-series designs were applied to a naturally occurring quasi experiment occasioned by the state of Colorado's reorganization of mental health services financing. RESULTS: The cost of services was significantly lower in counties with capitated services compared with counties with fee-for-service financing. Findings also suggested that economic incentives may lead to greater efforts at secondary and tertiary prevention. CONCLUSIONS: Policymakers and the public can expect that capitation will reduce the costs of children's mental health services below those likely with fee-for-service financing. Capitation per se, however, may not increase prevention as surely or swiftly as it lowers costs.

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