by Jordan Roberts
Director of Government Affairs, John Locke Foundation
Elected officials who work on health care reform tend to focus on coverage, that is, whether an individual has the necessary health insurance coverage to pay for the services one needs. Yet, very few leaders in health care reform focus on increasing access to care. The two are very different concepts.
In a previous opinion piece, I distinguished the two fronts in which I believe health care reform needs to take place. One front is rolling back rules and restrictions for the commercial insurance market, which has been regulated into dysfunction. Many families can’t afford the plans currently offered, even after receiving generous subsidies given to the insurer from the federal government. The other front is to completely remove the insurance companies from all (or most) of the health care purchasing process.
Health insurance creates an extra layer of costs and bureaucracy in the process of purchasing health care. Health care services purchased with health insurance are more expensive than it otherwise would be because it was purchased with insurance rather than through direct purchasing. The health insurance system in our country is filled with extra expenses that aren’t related to health care at all. Each one of us pays for these excess costs through higher health premiums.
In no other area of medicine is this price inflation more evident than in primary care. Fortunately, a growing field of direct primary care (DPC) providers are abandoning the third-party payer model and contracting directly with patients to provide care. Regulations around the practice are changing to open up access. This research brief will discuss the importance of primary care and some of the regulatory changes happening in hopes of growing this model.
It’s hard to understate the importance of primary care. A primary care doctor is the gatekeeper to the rest of the medical field and can have profound impacts on the rest of one’s life. A strong doctor-patient relationship has been found to improve health outcomes and reduce deaths. Furthermore, compared to those individuals who don’t have a primary care doctor, those who do are more likely to receive high-value care and report better health access and experiences in the health system.
Despite all of the clear evidence of the importance of primary care, many individuals still either don’t have a primary care doctor or do not see one. Research has shown that in recent years, the number of Americans with a primary care doctor has decreased, especially among younger individuals. It may be that they struggle to afford the out-of-pocket costs with primary care or lack the necessary insurance coverage to even get in the door. Regardless, this demand problem is concerning. A lack of primary care at a young age can later result in higher health care costs later in life.
But the supply side faces problems as well. Projections show a nationwide shortage of primary care physicians by 2035 of more than 44,000. Physician burnout, burdensome paperwork, and crushing medical school debt could help explain why there is such a vast projected shortage of required primary care physicians. Many in North Carolina are already living in an area in which primary care is scarce. In particular, 87 of North Carolina’s 100 counties have a health professional shortage area designation for primary care. Those who want to see serious improvements in health outcomes need to start with reforming primary care.
One free-market innovation has the potential to break up the status quo of primary care as we know it: direct primary care. In this arrangement, patients pay a monthly fee directly to the doctor for access to comprehensive primary care. There is no insurance involved, just a contract between a doctor and a patient for care. This is a substantially more affordable option compared to most comprehensive health insurance plans. Industry data reveals the average adult monthly membership costs $82, and 82% of family memberships cost between $50 and $225 a month.
There are several benefits to DPC. First, the monthly payment for an individual or family is equal to the out-of-pocket expenses for a few visits to the doctor’s office if one were to use insurance. Primary care is much more affordable in this arrangement compared to paying for it with traditional comprehensive health insurance. Second, with the absence of insurance paperwork, doctors can spend more time with patients. DPC doctors can spend more time developing relationships with many more patients by forgoing insurance paperwork. Third, removing insurance from the equation allows DPC doctors to contract with laboratory services providers and drug wholesalers to purchase these products at cost for patients, again significantly more affordable than when someone uses insurance.
The only threat to the North Carolina DPC providers is that the state views these practices as offering insurance, therefore subjecting them to insurance regulations. Fortunately, the North Carolina General Assembly is working on legislation that would prohibit DPC providers from being subjected to insurance regulations. Protecting DPC providers from insurance regulations will go a long way in ensuring that the industry will continue to thrive in North Carolina.
While North Carolina is working to protect this business model from being regulated as insurance, Congress is working to make it easier for people to use their health savings accounts (HSA) to purchase a DPC membership. As crazy as it sounds, the IRS does not classify a membership to a direct primary care office as a qualified expense for an HSA. As the law reads now, DPC providers are considered health plans, and an HSA holder can only have a high deductible health plan (HDHP).
The Primary Care Enhancement Act seeks to clarify the rules so that someone with an HDHP is allowed to use their HSA for a DPC membership. This small tweak in statutory language will open the door for so many to enter into a DPC arrangement and use HSA dollars, thereby boosting the use of primary care.
It will take a while to unwind the complex system of insurance that has become the status quo in American health care. But if health care reform is focused on restoring the doctor-patient relationship and making it easier for people to access care, real progress can be made. People are frustrated with how much insurance costs and how little value they actually get out of their health plan. Everyone should have access to primary care because it improves patients’ quality of life. The DPC model offers an affordable way which this can be accomplished and one that will expand true access to health care as the practice grows.