Anticipating January’s complete Republican control of the federal government and a new legislative session in similarly red Georgia, Tom Price’s go-to Atlanta columnist, Kyle Wingfield, launched a call, with support and direction from their favorite Georgia think tank, the Georgia Public Policy Foundation, for a version of Medicaid expansion which may well also indicate the direction that other aspects of TrumpPriceCare will be taking in the coming months.
The pitch is introduced with the unsourced claim that ACA expansion is projected to cost $7300 per newly covered adult. That figure might be a bit too high; HHS has said that for 2015 the cost per enrollee was $6336.
The pitch itself is straightforward. Georgia’s Medicaid expansion plan should comprise, for each adult enrollee, a $750 annual membership in a direct primary care (DPC) practice coupled to a “true catastrophic” health insurance plan with an annual premium of $1750. The “D” in DPC stands for “direct” because primary care is delivered in an insurance-free setting, which presumably reduces overhead to the point where the practice can be sustained by the annual membership fee, without any significant additional cost sharing. In fact, going “direct” is claimed to reduce cost so much that a DPC can provide, easy, holistic, and near unlimited access to primary care givers, 24/7/365, and free basic lab tests and dozens of generic drugs to boot. Can membership in such a practice be had for $750 per annum?
The Georgia Public Policy Foundation itself posted an article, mere weeks after publication of the Wingfield column referred to above, singing the praises of a DPC practice serving a group of employees of Union County, NC and their dependents. It appears that neither Foundation, nor the piece’s author, was aware that that DPC charges an adult membership fee of $1500 per annum – twice the $750 in the Foundation’s proposal. (View the county’s DPC contract here.)
Know also that DPC practices do not cover specialist care, emergency room visits, inpatient hospital care, non-generic drugs, durable medical equipment, or more
complex lab tests. Medicaid expansion enrollees would be left to face these expenses with only the kind of “true catastrophic” coverage a $1750 annual premium will cover. Such a policy in the current market might be available person under 25 eyes of age. It would cost a 42 year old about $3000. And these policies come with $7000 deductibles, a level that has recently seen middle-income people howling with anger.
DPC advocates insist that the transformative power of holistic DPC practices will hugely reduce the use of specialists, the number of hospitalizations, and the need for expensive drugs. Who knows what low, low premiums might result, when DPC brings down total medical costs for DPC patients?
Actually, I do.
The answer can be derived from data presented by one of DPC’s most fervent advocates, Katherine Restrepo, Director of Health Policy at North Carolina’s John Locke Foundation. In fact, Ms. Restrepo is the author of the Georgia Public Policy Foundation’s Union County article mentioned above, one of many similar pieces by her, attributing transformational wonders to that specific DPC plan. Will the Georgia Public Policy Foundation be surprised to learn that a careful analysis of the Union County program indicates that, Medicaid expansion under the ACA compares is an even better deal than the miracle that DPC has produced?
With her John Locke Foundation colleague, Julie Tisdale, Ms. Restrepo has provided an extended analysis of the Union County DPC program. Data is presented therein to contrast the costs and claims experiences of a group of 880 Union County employees and dependents enrolled in Union County’s optional DPC program against the costs and claims experiences of 1120 enrollees who declines that option. The latter chose Union County’s traditional insurance plan instead. While the data was generated for the purposes of comparison, it necessarily tells us a lot about the costs and claims experiences of enrollees in the DPC. Assume for the present discussion, that the authors’ conclusion that the DPC program saved the county $1.28 million dollars is correct; I’ll dive into that question in a separate post.
Here is what we now know about fiscal year 2015-2016. For each adult, Union County pays a $1500 per year membership for enrollment in a DPC practice. 410 employees and 470 dependents are DPC enrolled. (I have posted my computations underpinning this discussion and, where needed, supporting citations online in a Google Sheet.) Union County HR Director, Mark Watson, has noted that 37% (326) of the enrollees are children.
Because people often need medical goods and services that go beyond primary care, Union County also insures its employees for specialist care, hospital care, non-generic drugs, and other items not furnished at the DPC. In the most recently completed fiscal year, according to the Restrepo-Tisdale article, Union County paid $4.17 million dollars in medical and prescription drug costs on behalf of DPC enrollees, through either the DPC membership or through its claims process for non-DPC needs.
For 880 enrollees, this works out to $4,738 in costs for each enrollee. But, since the DPC enrollee pool contains large numbers of children, visualizing what level of claims might be expected from a population which, like the Medicaid expansion population, is entirely composed of adults requires an adjustment. Conveniently, Union County offers optional coverages for spouse and family coverage at premiums proportional to costs. From the fact that the county charges exactly 1/3 more for a spouse and one or more children than it charges for a spouse alone, we can reasonably estimate that each child incurs claims at not more than 1/3 the rate of a typical adult.
The adjusted annual claims level for an adult enrolled in DPC works out to $6290 paid by Union County. Each year, DPC plan participants kick in an average of $591 per
adult in cost sharing. Enrollee costs and county costs combined come to $6881
per annum. Cost sharing for Union County employees is capped at $2000 per annum, and DPC plan participants face no deductibles. In other words, Union County backstops its DPC plan by embedding it in comprehensive traditional insurance coverage for items beyond the limited offerings pre-paid to the DPC provider. The employee coverage is equivalent to a platinum plan under the ACA; if this plan were sold on an exchange, enrollees could expect an annual premium of nearly $8000.
In place of sound insurance wrapped around a DPC, the Georgia Foundation’s plan offers only a $1750 premium subsidy for a “true catastrophic” policy likely to have a deductible of $7000 for an average adult. In Union County, the average annual adult costs for specialist care, for hospital care, for drugs, labs, equipment, and services NOT covered by the DPC limited list is well over $5000. Under the Foundation plan, that would only spell a near “catastrophe” in insurance terms every year for every recipient meeting or exceeding average annual care usage. For each impoverished recipient with such average costs, it would be a true catastophe, as well.
On the other hand, if the Foundation plan were to pay the $1500 per year DPC membership that Union County actually costs, and still maintain the plan budget of $2500 per enrollee, only $1000 per year would be left for catastophic coverage. There is no policy you can buy for that price.
Annual costs of Union County’s DPC scheme ($6881) for 2015 exceeded those of Medicare expansion ($6336) by over $500 per adult. But Medicaid expansion is an even better bargain than that. The average adult in the DPC group is a 39 year old full-time county worker. The Medicaid expansion population is of similar age but less likely to have a good job, if working at all. On top of that, as I explain in a separate post, there is clear evidence that the Union County DPC enrollment has been cherry-picked; on the other hand, the Medicaid expansion population may even include a disproportionate share of people who, before the ACA came along, had been “lemon-dropped” by a health insurer.
The inadequacy of the $2500 per annum “DPC + catastophic policy” concept being flogged as a substitute for Medicaid expansion by Tom Price’s best Georgia friends ought to be obvious. If implemented, “catastrophic coverage” will gain a whole new meaning.