Bringing Competitive Direct Primary Care to Medicare
Direct primary care (DPC) is fast becoming an accepted alternative to fee-for-service payment in the private market, but it has yet to find its way into Medicare. That needs to change as soon as possible, and there is reason to hope that it will.
DPC is growing because many physicians and patients prefer it to the traditional, and still dominant, piecemeal payment systems run by most insurance plans, including Medicare. Instead of billing for each service they provide, DPC doctors get paid a fixed sum per patient, usually in the form of a monthly membership-like fee from the patient or the patient’s health plan (which is often sponsored by an employer).
DPC began as a way of providing premium services — “concierge care” — to patients who wanted expedited services and an extra level of attention from physicians. Concierge care is usually an add-on to the fee-for-service system. Concierge physicians bill insurance plans for the services they provide to their patients and also collect from their patients an additional annual or monthly membership fee. That additional payment entitles the patient to a higher level of service than other patients get, including more rapid scheduling of appointments.
Concierge care is a niche service. There are some consumers willing to pay an additional fee, on top of their regular cost-sharing requirements, to be able to get a higher level of service from their physician, but it is a small percentage of the overall market.
DPC has the potential to grow into something bigger and more transformative than concierge care by displacing, rather than supplementing, fee-for-service payments. Primary care physicians are supposed to help their patients stay healthy by making basic services and preventative care readily available to them. High-quality primary care can limit the need for expensive hospitalizations and medical interventions. Done right, primary care means careful monitoring of a patient’s health status and communicating with him or her as much as is necessary to avoid the progression of more serious health problems.
As DPC developed over the past decade, doctors began to see the monthly fee model as a way of getting rid of fee-for-service bills altogether. In most DPC practices, the monthly membership fees are set to cover all of the costs of providing a basic level of primary and preventive care to the enrolled patients. There are no separate fees billed to insurance plans for these services. The patients in DPC practices report high levels of satisfaction; they like being in regular communication with their physicians without getting billed for every conversation or office visit.
While DCP is growing rapidly, it is being held back by some outdated federal regulations. In particular, the rules governing the use of Health Savings Accounts (HSAs) need to be amended to allow account holders to use their balances to pay DPC monthly fees. Currently, tax rules preclude using HSA funds in this manner.
The giant Medicare program also needs what DPC has to offer. Over two-thirds of Medicare beneficiaries have two or more chronic conditions. This is a population that would benefit greatly from high quality primary care, but the program is still built on the fee-for-service model of payment, which creates barriers to low-cost, frequent communication between physicians and their patients.
Medicare should test a new primary care model like DPC through the Center for Medicare and Medicaid Innovation (CMMI). Although CMMI’s authority is too broad (it usurps policymaking powers that should properly reside with Congress), it is legitimate for the agency to test ideas like DPC to see if they can deliver better care at a lower cost to the Medicare population. In 2018, CMMI issued a request for information on the DPC concept, signaling a strong interest among program administrators in seeing if the idea can work within Medicare’s traditional insurance program.
An effective test of DPC in Medicare would look somewhat different from the way the model works in the private sector because it would be difficult to ask Medicare beneficiaries to pay an additional monthly fee to enroll in DPC practices. A better approach would be to allow the beneficiaries to pick their primary care physician from among those participating in qualifying DPC practices and then have the Medicare program pay the monthly fee on behalf of those beneficiaries. The beneficiaries who selected a primary care doctor through this process would have an incentive to do so because they would be guaranteed a low, per-visit co-pay whenever they went to see their selected physicians, perhaps set at no more than $5 to $10 (they currently pay 20 percent co-insurance for all physician services). Participation would be strictly voluntary. Beneficiaries who declined to select a primary care provider would pay the regular Medicare cost-sharing amounts when they went to see a physician.
The DPC practices participating in this Medicare test would be required to cover a pre-determined package of primary and preventative care services, including a specified number of office visits (at the guaranteed per-visit copay rate), all manner of electronic communications with their patients (telephone, email, text, and video conferencing), immunizations, and other services as defined in Medicare regulations. For providing these services, the practices would receive the fixed monthly payment from the Medicare for every enrollee selecting one of their physicians. The DPC physicians would not submit separate bills to Medicare for each of the services they provide.
The monthly fee paid by Medicare to the DPC practices would need to be set so that it is roughly budget neutral to what is spent under current law, with perhaps a small reduction to ensure some savings for the Medicare program. Primary care physicians generally bill Medicare for providing evaluation and management — E&M — services, which would be displaced by the monthly per patient amount. DPC practices would be required to report quality data, similar to what is being required by several other alternative payment models now being tested by CMMI.
Program administrators should allow the DPC practices, and physicians participating in this test to compete for enrollment by offering to the beneficiaries even lower per-visit copayments than the standard amount specified in the test. They could also enhance the services they provide beyond the minimum required by Medicare’s rules.
Better primary care in Medicare should produce savings, by reducing hospitalizations and other expensive interventions for patients with chronic conditions. The DPC practices participating in the test should share in those savings, which would provide a strong incentive to physicians to want to participate in the initiative.
DPC wasn’t invented by the federal government. It is an idea that sprang up in the private sector among entrepreneurial doctors wanting to break free from the hassles and dysfunction of fee-for-service medicine. All signs indicate it is a model that works, with lower costs and higher-quality care. It is now time to bring it into Medicare, so that elderly patients care can begin to experience the cost savings and better health that comes with a better way of providing primary care.
James C. Capretta is a RealClearPolicy Contributor and a resident fellow at the American Enterprise Institute.