That alone makes the AEG/WP report off by about $500,000,000.
In “Healthcare Innovations in Georgia:Two Recommendations”, the report prepared by the Anderson Economic Group and Wilson Partners (AEG/WP) for the Georgia Public Policy Foundation, the authors clearly explained their computations and made clear the assumptions underlying their report. One of the assumptions was that the fixed monthly fee for direct primary care would be $70 a month. I examined that assumption here, and I firmly believe $70 underestimates the fixed monthly fee that would actually be for direct primary care that is actually cost-effective at reducing the costs of downstream care. For this post, however, I will assume that the monthly fee is correctly priced at $70 a month.
In its computation purporting to show a billion dollar savings over the next five years from implementation of direct primary care with more to come in the five years after that, however, AEG/WP made the additional assumption that the $70 monthly fee would remain flat for a decade. That assumption accounts for hundreds of thousands of dollars of the computed savings.
AMG/WP have offered no justification for that assumption. It is hard to imagine how that assumption could possibly be justified. It is even hard to image how a responsible analyst could make such an assumption.
The report correctly reflects that as medical claim costs rise in compound fashion (by as much as 9.9% per year in the individual market), the amount that can be saved by DPC-attributed cost reductions also grows in compound fashion. These savings are accounted for in AEG/WP’s computations. Also, an identical upward, and compounding, trend is built in to their computations for the claims costs of traditional primary care.
The AWG/WP report assumes, however, the cost of a DPC membership will hold steady at $70 for an entire decade. Accordingly, in AEG/WP’s computations the savings from DPC grow exponentially, the costs of traditional primary care grow exponentially, but the costs of DPC remain perfectly flat.
Since direct primary care clinics must recruit staff, rent space, and buy goods in the same marketplace as other medical providers, including traditional primary care providers, AEG/WP’s choice to assume a stable $70 clinic fee is problematic.
If the $70 monthly fee is trended up for a decade by the same 9.9% per year used to calculate future claim prices, including the cost of traditional primary care, the monthly fee reaches $180 a month, and the annual fee increases by more than $1200. Had AEG/WP chosen to perform their DPC savings computation to reflect such seemingly predictable increases, the computed savings would been lowered by hundreds of thousands of dollars.
Interestingly, the AEG/WP report was published in May 2019. At the time, $70 was exactly the monthly DPC fee being charged by SALTA, a direct primary care company co-founded by David Wilson, one of the AEG/WP authors. By December 2019, however, SALTA announced that its fixed monthly fee was going up by almost 29%, to $90 a month.
Apparently DPC practices are not immune to medical cost inflation — at least if you own one.
Note: This Link will access the Google spreadsheet I used to calculate the effect on premiums of different values for the monthly fixed fee; it follows AEG/WP methodology. It also explores the difference in the individual market for 2025 between assuming that the $70 fee remains flat and assuming that it trends upward in parallel to rate used to compute all other health care costs.