**1. Introduction**

The paradigm shift from financing healthcare through government revenue, general taxation, and out-of-pocket to social health insurance is not new. In most of the developing nations, reform on the purchasing side is moving hand in hand with development of pooling functions. According to Moreno-Serra and Wagstaff, many countries of Europe and Central Asia include case-based payment for tertiary care and capitation payment for primary care. Likewise, Nigeria has adopted a similar system of financing healthcare through these two major options of payment [1].

Since the flagged in the Formal Sector Social Health Insurance Programme in Nigeria in June, 2005 capitation payment has remained one of the social health insurance payment mechanisms to the healthcare facilities through the Health Maintenance Organizations (HMO).

Health Maintenance Organization is a private or public incorporated company registered by the National Health Insurance Scheme (NHIS) solely to ménage the provision of healthcare services through healthcare providers accredited by the NHIS [2]. HMO provides the following main functions:


In Nigeria, presently there are 94 registered HMOs that are responsible for the payment of primary, secondary, and tertiary health services to the healthcare facilities on behalf of NHIS. Primary healthcare services include: out-of patient care, immunization, surgical procedures, internal medicine, HIV/AIDS, obstetrics, gynecology, pediatrics, laboratory investigations, and emergency care [4]. These services are covered by capitation payment. All other procedures that cannot be handled at the primary level of care can be undertaken at the secondary level, which the HMO paid healthcare facilities as the fee for service.

Capitation is defined as a payment method where the provider is paid in advance, a predetermined fixed rate to provide a defined set of services for each individual enrolled with the provider for a fixed period [5]. Capitation usually occurs under Bismarck or social health insurance healthcare system [6]. Bismarck model involves people (those who need healthcare) paying a fee to a fund that in turn pays health care activities, that can be provided by state-owned institutions, other government body-owned institutions, or a private institution. It is different from the Beveridge system (or National Health Insurance Schemes) in which government or central authority takes the responsibility of collecting and pooling funds and also pays for providers [7].

Every year, the National Health Insurance Scheme (NHIS) in Nigeria has been paid a large amount of money in the form of capitation. In Yobe State alone from January to December 2021 approximately, NHIS paid about (USD\$700985. 75) for the

*An Assessment of the Effect National Health Insurance Scheme Capitation Payment… DOI: http://dx.doi.org/10.5772/intechopen.102545*

payment of capitation to the accredited healthcare facilities for primary services in the state [8].

If the amount of money in funds received as a capitation by the healthcare facilities is properly allocated by providers, then one may expect the following:


This study aims to test these hypotheses concerning the effect of capitation payment on healthcare providers in Yobe State. There is a large amount of empirical literature on the capitation payment method, which focuses on the nature of this payment mechanism, but in general, it does not address the potential effect of capitation on services provision, infrastructure, and other ways of efficient utilization of the capitation fund, nor are the challenges of capitation payment system described in Sub-Saharian African Countries. This study represents an effort to fill this gap in the literature using the experience of Yobe State of Nigeria, where capitation payment has been introduced within the National Health Insurance Scheme.
