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Financial Incentives

Applicable Authorities

In general, all capitated contracts, regardless of authority used, must comply with the federal Medicaid regulations at 42 CFR 438.6. In general, capitation rates must be actuarially sound, which means they:

  • Have been developed in accordance with generally accepted actuarial principles and practices;

  • Are appropriate for the populations to be covered and the services to be furnished under the contract; and

  • Have been certified by actuaries.
States have considerable discretion in working with their actuaries to design innovative rate structures that provide incentives to achieve program goals, as long as the features are fully explained to CMS and meet the regulation.




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