Promote Choice, Competition, and
Value by Removing Barriers to
Wider Adoption of DPC
Although the Patient Protection and
Affordable Care Act and legislation in a
majority of states expressly affirm that
DPC is not insurance, further action at
the federal level is needed for patients
to safely fund and use HSAs for DPC.
IRS definitions need to be updated so
that the tax code conforms with other
relevant state and federal laws. In order
to permit individuals who hold HSAs to
access the benefits of Direct Primary Care,
the Internal Revenue Code (IRC) needs
to clarify that DPC does not constitute
a health plan under IRC Section 223(c),
and that periodic payments to DPC
practices for primary care services are to
be treated as qualified medical expenses
under Sec.213 (d). Ideally, this should be
done without unnecessary restrictions
on the type of arrangement a patient and
their doctor freely choose and that best
suits the needs of the patient. Giving
patients greater control of their healthcare
resources and more choice over the
care they receive will lead to greater
competition based on the value of the care
provided.
Expand DPC to the Medicaid
Population
Medicaid accounts for a significant and
growing portion of spending in most state
budgets (Rosewicz et al., 2020). In the
state of Texas, for example, spending on
Article II (Health and Human Services),
28 DALLAS MEDICAL JOURNAL • February 2021
which administers Medicaid, represented
more than 36% of the All-Funds11
appropriations for the 2018-19 biennium.
Medicaid is the costliest Article II program,
receiving $61.8 billion in All Funds for the
biennium, or 78% of the total Article II
funding (Texas Comptroller, 2018, pp. 6-7).
By minimizing the costs associated with
unnecessary care in the Medicaid program,
DPC could help considerably to alleviate
the stress on state budgets and reduce
taxpayer burden.
The emergency department (ED) is an
inappropriate and expensive way to provide
care for nonurgent medical conditions.
Nationally, patients with Medicaid, CHIP,
or “other state-based programs” as an
expected source of payment accounted for
40.3% of emergency department visits in
2017, significantly more than the privately
insured (31.2%), Medicare beneficiaries
(18.5%), or the uninsured (8.0%) (National
Center for Health Statistics, 2020, Table
6). Barriers to timely primary care have
been associated with increases in ED
utilization. Reported barriers include: (a)
inability to contact the office; (b) inability
to get an appointment soon enough; (c)
excessive wait to see the doctor after
arriving at the office; (d) inconvenient
office hours; and (e) lack of transportation
(Cheung et al., 2011). The Medicaid and
CHIP Payment and Access Commission
reported that, “despite the fact that nearly
all Medicaid enrollees report having a
usual place of care other than the ED,
approximately one-third of adult and 13%
of child enrollees have reported barriers to
finding a doctor or delays in getting needed
care” (Medicaid and CHIP Payment and
Access Commission MACPAC, 2014b;
MACPAC, 2014a).
According to a Texas Department of
State Health Services analysis of hospital
emergency department data from 2018
(Texas Department of State Health
Services, 2019), the most frequent payer
source from all avoidable ED visits in
Texas was Medicaid (29.2%), followed
by uninsured or self-pay (27.2%), private
insurance (27.1%), and Medicare (13.9%).
In 2014, 31% (n = 346,651) of Texas
Medicaid adult enrollees visited the ED
at least once, and only 13% of those ED
visits were considered “not preventable” or
“unavoidable”( Delcher et al., 2017).
DPC has shown the potential to reduce
unnecessary ED utilization substantially.
The case study included in the 2020
Society of Actuaries analysis (Busch et al.,
2020, pp. 27-35) reported a 40% reduction
in ED visits and a 53.6% reduction in
ED claims costs in the DPC group as
compared with the group in traditional
primary care. According to an analysis by
United Health Group (2019), the average
cost of treating common primary care
treatable conditions at a hospital ED
($2,032) is 12 times higher than the cost
($167) in a physician’s office. If even a
portion of the inappropriate ED utilization
can be reduced by including DPC as an
option in Medicaid, it could have a positive
fiscal impact on state budgets. The Society
of Actuaries case study also showed the
potential for DPC to reduce costs through
a reduction in hospitalizations of 25.54%
among DPC members (Busch et al., 2020,
p. 32). In addition to cost reduction,
DPC also has the potential to improve
health outcomes in Medicaid through
better coordinated care. Importantly,
tracking downstream impact (for example,
reductions in unnecessary ED utilization
and hospitalizations) could be done in
the Medicaid program without imposing a
significant administrative burden on DPC
practices.
Conclusion
Primary care providers play a central
role in the health and well-being of
Americans. The decisions they make
influence health outcomes for their
patients and have widespread downstream
consequences that affect the cost
efficiency of the healthcare system.
However, due to a number of challenges,
including physician burnout, oversized
patient panels, increased administrative
burden, reduced time spent with patients,
low reimbursement relative to other
specialties, and a shrinking workforce in
Policy Recommendations
1. DPC differs fundamentally from traditional capitation in that the patient, rather than an insurance company, is the payer.
This direct patient-doctor link creates a system where doctors are incentivized to keep patients well without limiting patient
care in order to comply with insurance company parameters—a problem seen with capitated models like the health maintenance
organizations (HMOs) of the 1990s.
2. DPC differs from insurance since DPC providers do not assume risk for additional services that are not provided under
the agreement. A patient can be charged additional ancillary fees for services such as labs, imaging, and minor procedures.
Some practices charge a low subscription fee and an additional per-visit fee to discourage overuse of services. However, if
the per-visit fee is higher than the monthly subscription fee, the practice functions more like a cash pay practice and may be
subject to insurance regulations. For a more detailed discussion of the definition of DPC, see DPC Frontier, n.d.
3. The average exposure period for selected members during the two-year period of interest was 22.0 and 21.9 months for
the DPC option and traditional option, respectively.
4. The risk-adjusted results account for differences in health status of patients. Unadjusted results do not account for these
differences.
5. The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119, § 10104 contains a provision in
Section 10104 stating that the Secretary of HHS “shall permit a qualified health plan to provide coverage through a qualified
direct primary care medical home plan that meets criteria established by the Secretary, so long as the qualified health plan
meets all requirements that are otherwise applicable and the services covered by the medical home plan are coordinated
with the entity offering the qualified health plan.” For a full discussion, see: https://www.law.cornell.edu/uscode/
text/42/18021
6. According to the IRS, DPC is not considered an HDHP because it provides coverage for HDHP benefits before the minimum
annual deductible has been met.
7. Section 223(c)(1)(B) of the Internal Revenue Code provides that, “in addition to coverage under an HDHP, an eligible individual
may also have specifically enumerated coverage that is disregarded for purposes of the deductible” (IRS, 2004).
8. See, for example, Letter to IRS from Sens. Cantwell and Murray, and Rep. McDermott, June 17, 2014, Letter to the IRS
from Sens. Cruz and Johnson, April 17, 2018, Letter to the IRS from Docs 4 Patient Care Foundation, January 4, 2019.
9. See, for example, Letter from John A. Koskinen to Sen. Murray, June 30, 2014, Letter from Drew Maloney to Sen. Cruz,
May 15, 2018 ().
10. For the purposes of IRS Code 223(d), qualified medical expenses are amounts paid for the diagnosis, cure, mitigation,
treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, for transportation to
receive that care, and for certain long-term care expenses. See: 26 USC § 213(d)(1).
11. All Funds include General Revenue Funds, General Revenue dedicated funds, federal funds, and other funds.