Which description of incentives is correct for fee-for-service and capitation?

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In fee-for-service, payment follows each service rendered. That ties revenue directly to volume, so providers have an incentive to do more tests, visits, and procedures to earn more money, even if every service isn’t strictly necessary. In capitation, a provider receives a fixed amount for each enrolled patient over a period, regardless of how many services that patient uses. This creates an incentive to be efficient and to manage care cost-effectively, focusing on prevention and coordinated care to avoid costly interventions.

However, capitation can risk under-service if the payment doesn’t adequately reflect patient complexity and risk. That’s why risk adjustment and quality measures are important in capitation arrangements—to align incentives with patient needs and prevent underservicing.

So the correct description captures: FFS incentivizes higher volume; capitation incentivizes efficiency and cost containment, with a caveat about potential underservice if risk adjustment isn’t strong.