According to the chap who runs the Massachussetts exchange, the state and medical providers still face a hefty expense for treating those who don't have insurance, with over half the cost of medical care for the uninsured still persisting. And the new system is very expensive, particularly in a time of fiscal trouble.

It's thus predictible that a commission appointed by the governor wants to move in a new direction: capitation. That's when the state pays providers a fixed amount for each person (in the plan, or in their practice) and lets the providers figure out how to treat them.

Capitation looks attractive, because it discourages doctors and hospitals from doing too much. But, as with all good things in life, it has a few downsides ...

I don't like a system where the doctor has a financial incentive to give me unnecessary tests. But I'm even less fond of the idea of giving her financial incentives not to give me necessary ones.

via Massachussetts Health Plan Pushes for Capitation - Megan McArdle.