Billing and claims
What Is Capitation in NEMT? How a Capitation Payment Reaches Your Company
A capitation payment is a fixed amount a state pays a health plan or NEMT broker each month for every Medicaid member it covers, whether or not the member rides. The plan or broker then usually pays your company per trip under your contract. Kentucky's regional rates ran from $6.88 to $14.69 per member per month in a November 2025 briefing to state lawmakers.
- Capitation pays a health plan or broker a set amount per member per month, not per ride, and it keeps what it does not spend.
- Your company is usually paid per trip at the rates in your broker agreement, not a share of the capitation.
- An actuary sets the rate from past trips and costs, adds trend, administration, and margin, and CMS approves it.
- Arkansas's 2025 broker rates held $0.85 per member per month for administration and a 3 percent margin, with the rest for rides.
- A broker may not withhold a needed ride to save money, and you may never bill the rider when the broker does not pay.
What a capitation payment is
Federal rule 42 CFR 438.2 defines a capitation payment as “a payment the State makes periodically to a contractor on behalf of each beneficiary enrolled under a contract and based on the actuarially sound capitation rate.” The state makes the payment “regardless of whether the particular beneficiary receives services during the period covered by the payment.”
Medicaid.gov describes managed care the same way: plans “accept a set per member per month (capitation) payment” for the services they cover. Rates are quoted per member per month, or PMPM.
The contractor usually takes the risk. Under the same rule, in a risk contract the plan or broker assumes the cost of covered services and takes the loss if they cost more than the payments. If its members ride less than expected, it keeps the difference.
| Fee-for-service | Capitation | |
|---|---|---|
| Who the state pays | The provider who gave the ride | A health plan or broker |
| What it pays for | Each trip, mile, or service on a claim | Each enrolled member, each month |
| Who carries the cost risk | The state | The plan or broker |
| How you are paid | By the state, from its fee schedule | By the plan or broker, under your agreement |
Texas’s fee-for-service Medical Transportation Program is an example of the first column: enrolled demand response providers bill TMHP, the state’s claims administrator, for each completed leg. See fee-for-service Medicaid.
How capitation money reaches your company
There are three common paths from the state to a ride company.
| Path | Who gets the capitation | Examples |
|---|---|---|
| Through a health plan | A managed care organization gets one capitation for all of a member’s care, rides included. It often hires a broker to run the rides. | CMS’s transportation guide (SMD 23-006, September 28, 2023) says rides in a plan’s risk contract must be included in its actuarially certified capitation rate |
| Straight to a broker | A NEMT broker that contracts only for rides. Federal rules call it a NEMT prepaid ambulatory health plan (42 CFR 438.9). | Georgia pays the broker in each of its five regions a monthly rate for each eligible member (NEMT manual, July 1, 2026). In 2025, Arkansas paid three brokers on a full-risk capitated basis across seven regions. |
| Through another agency | Another state agency runs the program and contracts regional brokers, who receive the capitation | Kentucky’s Medicaid agency contracts with the Kentucky Transportation Cabinet to run NEMT under a risk-based, capitated model. The Cabinet contracts one broker in each of 15 regions, and each region’s rate is paid out to its broker monthly. |
On every path, the money reaches you the same way: as payment for trips under your agreement. Georgia’s manual says that from the capitation it receives, “the Broker will pay transportation providers in accordance with the terms of the service agreement.” It also requires the broker to accept the monthly rate as payment in full, covering its administration, transportation costs, overhead, and profit.
When a health plan hires a broker, the plan still answers to the state. Under 42 CFR 438.230, the plan keeps ultimate responsibility for its contract, whatever it delegates. Some states also carve rides out of their plans. See how states run NEMT.
How capitation rates are set
A capitation rate is a forecast. Under 42 CFR 438.4, it must be actuarially sound: projected to cover all reasonable, appropriate, and attainable costs under the contract. An actuary must certify it, and CMS must approve it. Under 42 CFR 438.5, the state builds the rate in steps:
- Base data. Real trips and costs from no more than the three most recent complete years.
- Trend. Expected changes in how often members ride and what rides cost.
- Non-benefit costs. The broker’s administration, taxes, reserves, risk margin, and cost of capital.
- Adjustments. Program changes and anything else needed for a sound rate.
Kentucky’s Medicaid agency told lawmakers on November 5, 2025 that its rates for state fiscal year 2026 (July 1, 2025 to June 30, 2026) used the trips actually given in calendar year 2024. The actuary adjusted for claims not yet reported, enrollment changes, new covered services, reimbursement rate updates reported by the Transportation Cabinet, and trend. Each of the 15 regions has its own rate, paid monthly for its assigned members.
| Kentucky NEMT, from the November 5, 2025 briefing | Figure |
|---|---|
| Trips in state fiscal year 2025 (July 2024 to June 2025) | 3,363,272 |
| Capitation paid in state fiscal year 2025 | $174,953,006 |
| Lowest regional rate | $6.88 PMPM, Region 11 |
| Highest regional rate | $14.69 PMPM, Region 5 |
Those totals work out to about $52 of capitation for each trip given, before the brokers paid for rides, staff, and overhead. See Kentucky for how its regions work.
A worked example: Arkansas Region F
Arkansas published the rate build behind its 2025 broker payments with its 2026 broker bid. Its actuary’s CY 2025 rate development, dated November 22, 2024, splits each region’s rate into three parts.
| Arkansas CY 2025 rate, PMPM | Region A (lowest) | Region F (highest) | Statewide average |
|---|---|---|---|
| Projected ride costs | $1.48 | $11.07 | $3.92 |
| Broker administration | $0.85 | $0.85 | $0.85 |
| Margin | $0.07 | $0.37 | $0.15 |
| Capitation rate | $2.39 | $12.28 | $4.91 |
| Minimum the broker must spend on rides | $1.40 | $10.51 | Set by region |
Region F’s rate of $12.28, across its estimated 810,262 member months for 2025, comes to about $9.95 million for the year. The broker must spend at least $10.51 PMPM on rides, about $8.5 million, or pay the state the difference. The actuary set the margin at 3.0 percent of revenue. Administration came to about 17.2 percent of revenue statewide.
Federal rules do not hold a broker paid directly by the state as a NEMT prepaid plan to the 85 percent medical loss ratio standard used in setting other plans’ rates: 42 CFR 438.9 applies the actuarial soundness rules to NEMT prepaid plans except that one. Arkansas instead set a spending floor of 95 percent of projected ride costs. Its actuary called the floor an appropriate measure in place of a fixed loss ratio, because target loss ratios vary widely between regions. See Arkansas for its current brokers.
What capitation means for your rates and trip volume
- Your rate is in your agreement. The capitation sets the broker’s budget, not your price. MTM Health’s standard agreement, in the January 1, 2023 version Pennsylvania posts, pays the rates in its Schedule A.
- Trips are not guaranteed. The same agreement says it guarantees no minimum number of trips and that volume may vary at MTM’s discretion.
- Rates can change mid-contract. MTM may amend its rates on written notice. The change counts as accepted unless you reject it in writing within 30 days.
- Some states set a floor. Louisiana’s manual (section 10.1, issued July 14, 2025) requires brokers to pay no less than the published fee-for-service rate on the date of service, unless the broker and provider agree otherwise. Federal rule 42 CFR 438.6(c) also lets a state require its health plans to pay at least a minimum fee schedule, such as the state’s own rates.
- CMS expects fair broker pay. SMD 23-006 says states should make sure a broker does not pay so little that local providers refuse to take part.
- Your trips shape next year’s rate. Kentucky’s and Arkansas’s rates start from the trips and costs of past years. Kentucky’s actuary also adjusts for reimbursement rate updates the Transportation Cabinet reports, so provider rate changes can feed into the next capitation.
Three federal rules protect riders and you:
- A broker may not withhold a needed ride, or give a ride that is not the most appropriate and cost-effective one, for financial gain (42 CFR 440.170(a)(4)(ii)(D)).
- You may not pay a broker anything, including kickbacks, rebates, cash, gifts, or free services, to get trips (440.170(a)(4)(ii)(C)).
- Members cannot be billed when the state does not pay the plan, or the plan does not pay you (42 CFR 438.106). MTM’s agreement says the same: you look only to MTM for payment.
Before you sign or renew, ask the broker for its rate sheet, compare it with your state’s fee schedule and your own costs, and read the amendment clause. How to negotiate NEMT broker rates covers what to ask for.
Frequently asked questions
What is a capitation payment in Medicaid?
Federal rule 42 CFR 438.2 defines it as a payment the state makes periodically to a contractor for each member enrolled under a contract, based on an actuarially sound rate. The state pays it whether or not the member uses any services during the period. The contractor can be a health plan or a NEMT broker.
Are NEMT providers paid by capitation?
Usually not. The capitation goes to the health plan or broker, which pays you under your agreement. Georgia's NEMT manual (July 1, 2026) says that from the capitation payments it receives, the broker pays transportation providers under the terms of each service agreement. MTM Health's standard agreement pays the rates in its Schedule A rate sheet, and its Virginia handbook (approved August 10, 2026) calculates each trip's payment from that sheet.
Who sets NEMT capitation rates?
The state, through an actuary, and CMS must approve them. Kentucky's Department for Medicaid Services told lawmakers in November 2025 that a contracted actuary develops and certifies its NEMT rates from past claims, with adjustments for enrollment, costs, trips, broker administration, and risk margin. Each region gets its own rate.
What does PMPM mean?
Per member per month. It is how capitation rates are quoted. A $4.00 PMPM rate means the plan or broker receives $4.00 each month for every member enrolled with it in that region or rate group, whether that member takes ten rides or none.
Can a broker paid by capitation cut my rates or trips?
It can change them under your agreement. MTM Health's standard agreement, in the January 1, 2023 version Pennsylvania posts, guarantees no minimum number of trips and lets MTM change rates on written notice, accepted unless you reject it in writing within 30 days. Federal rules still bar a broker from withholding a needed ride or picking an unsuitable ride for financial gain.
Is capitation the same as a per diem?
No. A per diem, billed with HCPCS code T2002, is a daily charge a transportation provider bills for one rider's day of transportation. A capitation payment goes to a health plan or broker for every enrolled member each month, whether or not anyone rides.