RISK AND THE GENERAL-PRACTITIONER BUDGET HOLDER

For most individuals, the use made of health care in a given year is d etermined principally by unpredictable random incidents. Of course, so me individuals have a predictably higher predisposition to illness tha n others. However, the general consensus is that only a fraction of in dividual variability in health care costs can be predicted. The purpos e of this paper is to explore the implications of this inherent random ness for setting health care budgets for general practitioner purchase rs of health care. The paper argues that variability in utilization in health care is very high; that no capitation formula can ever complet ely capture that variability, even for large populations; that the var iability may give rise to certain dysfunctional consequences if not ma naged carefully, and that therefore careful attention should be given to the managerial arrangements associated with any devolution of healt h care budgets. (C) 1998 Elsevier Science Ltd. All rights reserved.