THE POLITICAL-ECONOMY OF CAPITATED MANAGED CARE

Despite the fact that billions of dollars are being invested in capita ted managed care, it has yet to be subjected to the rigors of robust m icroeconomic modeling; hence, the seemingly intuitive assumptions driv ing managed care orthodoxy continue to gain acceptance with almost no theoretical examination or debate, The research in this paper finds th e standard unidimensional model of risk generally used to analyze capi tation-ie, that risk is homogenous in nature, organizationally fungibl e, and linear in amplitude-to be inadequate, Therefore, the paper prop oses to introduce a multidimensional model based on the assumption tha t phenomenologically unrelated species of risk result from non-homogen ous types of socioeconomic activity in the medical marketplace, The mu ltidimensional analysis proceeds to concentrate on two species of risk : probability risk and technical risk. A two-dimensional risk matrix r eveals that capitation, far from being a market-oriented solution, act ually prevents the formation of a dynamic price system necessary to op timize marketplace trades of medical goods and services. The analysis concludes that a universal attempt to purchase healthcare through capi tation or any other insurance mechanism would render the reasonable at tainment of social efficiency highly problematic, While in reality the re are other identifiable species of risk (such as cost-utility risk), the analysis proceeds to hypothesize what a market-oriented managed c are approach might look like within a two-dimensional risk matrix.