New Bill Would Allow Direct-Primary Care, HSAs to Co-exist

Direct-primary care arrangements don't fit with Health Savings Accounts in two important areas. Perhaps that'll change this year.

Four US senators - two Democrats and two Republicans - recently introduced legislation to allow patients to enter into direct-primary care relationships, remain eligible to fund a Health Savings Account, and reimburse the monthly fee for this medical arrangement tax-free from a Health Savings Account.

This isn't the first time such legislation has been proposed. But despite the benefits to patients' health and finances, the concept hasn't become law.

Why not? And what is direct-primary care? Will this time be any different?

Let's examine each of these issues.

Defining Direct-Primary Care

Direct-primary care is a contractual relationship between a physician and a patient in which the physician provides a range of primary-care services for a fixed monthly fee. The fee is often set based on a patient's age and perhaps medical condition. Thus, a parent's monthly fee may be more than a child's, and a marathon runner may pay less than, say, a sedentary diabetic smoker.

This arrangement offers many benefits to both clinician and patient, including

Financial certainty. The physician has a consistent, dependable income stream the patient can budget for care without worrying about deductibles, copays, or coinsurance for routine medical care.

Relationship. The physician can get to know a patient's full medical and mental-health history and the patient's treatment preferences (conservative versus aggressive approaches to treatment).

Focus on health. The provider's incentive is to keep a patient healthy. Period. The financial model breaks down quickly if patients schedule appointments frequently for acute episodes of chronic conditions. The physician also has incentives to deliver innovative and perhaps nontraditional care - think patient webinars on healthy eating, remote monitoring of insulin levels or heart activity, a social worker to assist the patient with housing and other social determinants of health, and support groups.

Control. Patients are no longer constrained in treatment by what their insurer covers. Doctors no longer have to secure authorization for some treatments, submit claims, and track payments. The patient and doctor determine the right course of treatment, and the only money that changes hands is the electronic draft for the monthly fee.

Access. Direct-primary care practices typically communicate with patients via e-mail and through video sessions. They often are available after-hours. These arrangements are both efficient (no travel, no sitting in a waiting room with sick patients) and financially advantageous (reduced visits to an urgent-care facility or hospital emergency department for urgent but non-serious conditions).

And sometimes the extra attention can pay dividends, as this LinkedIn post from earlier this week illustrates.

Direct-primary care is sometimes confused with another model called concierge care. In the concierge model, patients pay a monthly or annual fee for enhanced service - say, same-day appointments or a more robust physical exam. In these arrangements, the insurance component is typically the standard arrangement - the doctor creates a claim for services and submits it to the insurer for payment.

The Collision of Direct-Primary Care and Health Savings Account

Direct-primary care arrangements weren't common when Congress passed Health Savings Account legislation in 2003 and a subsequent major bill in 2006. As a result, direct-primary care collides with Health Savings Accounts in two important areas.

Direct-primary care is disqualifying coverage. The Obama Administration promulgated rules during implementation of the Affordable Care Act that defined direct-primary care as another form of medical coverage. And since this coverage offers first-dollar benefits (after paying the monthly fee) with no patient cost-sharing, it disqualifies a patient from opening and funding a Health Savings Account. The Trump Administration wanted to rescind this rule, but it couldn't find the legal basis to alter the definition based on the existing regulations.

This rule is particularly frustrating to patients because direct-primary care is an ideal care model for patients with high deductibles. Direct-primary care patients aren't faced with the prospect of reducing necessary care due to financial considerations. The focus on wellness is designed to reduce the patient's need to access care through other providers whose services are applied to the deductible. And when a patient needs diagnostic tests or specialty care, a primary-care doctor, who's not affiliated with a hospital or physician network, can help navigate patients to service providers whose price/quality are optimal.

Direct-primary care payments aren't qualified expenses. Because monthly fees don't directly pay for corresponding medical services, these payments aren't considered qualified expenses. Thus, a patient who's no longer eligible to fund a Health Savings Account but has a remaining balance can't withdraw those funds tax-free to pay the monthly direct-primary care fee.

Thus, patients face the choice of receiving care the traditional way (paying for each encounter) and reimbursing their expenses tax-free from their Health Savings Account, or entering a more comprehensive relationship with their provider (and eliminating transactional expenses) and paying their monthly fee with after-tax funds.

Putting patients in this position is unfortunate for both their health and their finances.

Prospects

Addressing these conflicts between direct-primary care and Health Savings Accounts isn't a new concept. Former Sen. Orrin Hatch (R-UT), former Rep. Erik Paulsen (R-MN), and later Sen. Marco Rubio (R-FL) have introduced legislation that addresses the direct-primary care issue and other enhancements to Health Savings Accounts. And the Republican-led House of Representatives passed legislation to fix the issue in the summer of 2018, but the bill died when the Senate didn't take it up before the midterm elections.

Perhaps this time will be different. Sen. Cassidy, a surgeon, is a leading and respected voice on healthcare issues in the Senate. He chairs the Senate's Health, Education, Labor, and Pensions (HELP) Committee, which has jurisdiction (along with the Senate Finance Committee) over the issue.

The Bottom Line

This bill represents a common-sense approach to receiving care. The concept of a fixed monthly fee to pay for a patient's care - regardless of how little or how much the patient accesses services during the month - is a core funding principle of Medicare Advantage and is favored by people who want to eliminate incentives for medical providers to overtreat to collect more per-transaction reimbursements. It helps physicians and patients budget. It gives patients a health consultant rather than a medical provider encouraged by insurer's reimbursement rules to treat illnesses rather than focus on promoting health. It gives providers greater satisfaction because they can spend more time with patients to understand their health concerns, their social environments, and their treatment preferences.

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