Conclusions and Recommendations

I have shown that small insurers are less efficient than large insurers due to higher variation in their Population Loss Ratio Estimates. Capitation forces clinically efficient health care providers to become inefficient insurers and inefficient clinicians because risk assuming health care providers must cut $PI$'s benefits, even when their capitation payments are adequate for the population. Capitation increases the financial risks of operating health care facilities, disproportionately benefits risk transferors, harms providers and patients, and forces our health care (finance) systems to become less, not more, efficient.

Capitation only works in very inefficient health care (finance) systems when providers can avoid cutting medically necessary and appropriate care, because most providers are overpaid (See Section 12. $D$ and $E$ cannot maintain service quality and quantity unless $PI$ pays all of them more than 90% of its Earned Premiums.

The conclusion is stark: Capitation cannot steer inefficient health care (finance) systems toward efficiency because as providers adjust to capitation, the quality and quantity of health care services they provide must fall far below the level of medically necessary and appropriate care. Capitation steers health care (finance) systems from inefficient states in which patients receive medically necessary and appropriate care to inefficient states in which some, if not all patients, do not.

To improve health care (finance) system effectiveness and efficiency we must identify and eliminate inefficient insurance operations, beginning with risk assuming health care providers, then working on hundreds of our smallest, least efficient health insurers. $NHI$ is the most efficient insurer possible, but 30 - 40 large, efficient $B$s, can offer higher benefits than $PI$, need less Surplus, would better protect health providers from financial ruin, will earn reasonable and sustainable profits, avoid operating losses, and avoid insolvency with probabilities close to $NHI$s. Increased insurer efficiency, not capitation, is the path toward more efficient health care (finance) systems.