AEG/WP’s chosen actuary did not validate the assumption that direct primary care reduces downstream care costs.

AEG/WP report declares that “[Nyhart, an independent] actuary determined that “(1) the modeling assumptions are reasonable for this type of analysis and (2) the illustrative projections and savings are reasonable outcomes based on the modeling assumptions and data inputs selected.” This statement sounds like powerful support for report’s key assumption that direct primary care brings huge reductions in downstream care. It seems intended to convey the idea that the actuary from Nyhart engaged in an independent, probing analysis of past claims data to make an actuarial sound prediction of future claims. But that’s not what Nyhart was asked to do.

As the actuary also noted:

Nyhart relied on AEG and WP for the accuracy of the data provided to us and accepted it without audit. To the extent that the data provided is not accurate, the projections provided in this report would need to be modified to reflect revised information.

<SNIP>

Claims Reduction Due to Direct Primary Care Model: A 15% reduction in total claims (medical and prescription drug) was assumed. The factor is based on research and case studies prepared by Wilson Partners and represents the low end of possible savings.

Taken together these passages suggested that the actuary, Randy Gomez of the Nyhart firm, had concluded no more than that the 15% was “on the low end” of the specific material presented to him by Wilson Partners. Mr Gomez has confirmed that understanding to me in an extended telephone conversation.

We have previously examined the source data used by Wilson Partners: a 2018 20% claim of possible involving CHI; a 2016 claim of possible savings for 22% for Paladina/Arvada; and 21 % possible savings for Nextera in 2015. Mr Gomez could appropriately sign off on Wilson Partners suggestion that 15% represented a safe low end figure for possible savings after assuming 20%, 22% and 21% were accurate possible savings data points. Gomez intended no more than that.

Gomez, in other words, had accepted but not validated the cost reduction claims presented to him by Wilson Partners. Specifically, Gomez was not asked to undertake, and did not undertake, an actuarial examination of medical risk data or historical claims data from the clinics identified to him. He was not hired to, and did not, in any way address selection bias or any similar factor. When asked about the clinical and risk data supporting the cost reduction assumptions, Gomez referred me back to Wilson Partners.


Reach out to Mr Gomez at randy.gomez@nyhart.com or (317) 845-3595. He was interested in the subject, candid, and a pleasure to talk to.


But what if AEG/WP had found an actuary who claimed to have actually validated the 15% downstream cost reduction claim for direct primary care? In that case, the appropriate response would have been, “Show me.”

The reality is that neither actuaries nor Wilson Partners nor anyone else has as yet demonstrated that direct primary care lowers downstream claim costs after adjustment for selection or other biases — by any amount.

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