DPC + Cat is not a good substitute for full ACA Medicaid expansion

Adapted from B. Matthews, C. Crafford, and C. Queen, Direct Pay Medical Model at Access Healthcare. Presentations of a course project at Poole College of Management, North Carolina State University, Chapel Hill, NC, August 23 & September 13, 2013.

When Brain Forrest MD, the founder of the Access Healthcare direct primary care clinic, does legislative advocacy at, for example, the United States Senate, he shows the data of the foregoing chart. It’s from a 2013 course project by three NC State post-baccalaureate management students. He advocates pro-DPC legislation, apparently telling policy makers that the NCSU students found that, over a ten year period, Forrest’s patients’ total costs of care were lower than even than the lowest of the selected industrialized countries, and had remained flat at $2200 a year through Forrest’s ten years in direct pay practice.

That $2200 figure is composed from an estimate of the annual fees for subscription members of Forrest’s DPC clinic coupled with a catastrophic coverage insurance policy priced at $1750. After passing through the hands of Forrest’s allies in the public policy arena, this soon became a proposal by the Georgia Public Policy Foundation for an alternative to Medicaid expansion, for about 400,000 low-income Georgia adults, that would provide each of them with a catastrophic coverage insurance policy and a direct primary care subscription. The Foundation prices this “patient-centered” option at between $2000 and $3000 per year, a fiscal conservative’s dream when compared to the $5370 per so-called “expansion adult” projected for 2018 by CMS’s chief actuary.

But even $3000 does not come close to providing adequate funding for the health care needs of the Medicaid expansion population. The Foundation’s model, like Forrest’s claim that his DPC patients pay the lowest amounts in the industrialized world, seemingly rests on a massive error. The calculations Forrest presented reflect a patient population that carried high-deductible catastrophic policies but paid not a penny of cost-sharing for any downstream care. It is absurd to suggest that any typical patient panel will have a similar result.

Some DPC advocates seem to believe that there is some sort of “true catastrophic coverage”, under which anything beyond primary care is a “true catastrophe” for which an insurer will pay all or nearly of the total cost. Such policies do not seem to actually exist. If they did exist, the premiums would likely be quite high, comparable to those of platinum policies on ACA exchanges. In any event, a fantasy of this sort provides a foundation for the delusion that “DPC + a cat” can meet the health care needs of indigents.

To get some idea what health care for indigents might actually cost, we can start with looking at catastrophic policies as they exist, today, in Georgia. A 42 year old (average age for expansion adults) Atlanta resident can have catastrophic coverage for $3200 per year; it comes with a deductible of $8150.

It has an actuarial value of less than 60%; so, annual cost-sharing would average at least $2133 for each covered person. Adding the cost-sharing and the premium, annual expenses for a covered person of average age and with average experience would come to $5333.

Even a $3000 version of the Foundation’s program would be insufficient to pay the premium of a catastrophic coverage policy for an indigent adult of average age. And even with a “cat” policy in hand, and primary care prepaid, an average indigent patient would still need massive financial assistance to meet an average patient share of downstream care costs.

If there were sound evidence that direct primary care can actually produce net cost savings, the care of that average expansion adult might be brought below $5333. Since there is no sound evidence that direct primary care can do that, however, Medicaid expansion at $5370 completely reasonable.

Bonus Segment 1. The cost of DPC+Cat were not flat for ten years.

It is quite unlikely that the costs for Forrest’s patients at Access Healthcare, even just those for DPC fees and catastrophic premiums, stayed constant from 2002 through 2013. Medical cost inflation, per the Bureau of Labor Statistics rose about 50% over that period. An insurance policy comparable to one that cost $1750 in 2013 should have cost only $1167 in 2002.

As to the direct primary care fees at Access Healthcare, the students found that the average member in 2013 had 3.7 clinic visits, for which he would have paid $473. Dr. Forrest himself has published rates for his own practice in 2002 that would have priced 3.7 visits at $285. Forrest’s 2013 fees were actually 65% greater than his 2002 fees; he was raising fees even faster than the general rate of medical cost inflation.

Forrest’s patients’ cost curve flexes upward, like those for every country shown.

Bonus Segment 2. The $1750 premiums in the Forrest calculation reflect the exclusion of those with pre-existing conditions.

The relationship between 2013 catastrophic policies to those in 2020 is less straightforward. Above I used a $3200 policy from 2020; had it existed, the same policy if deflated to a 2013 value (using BLS information as in the previous segment) would have cost about $2600, $900 more than the $1750 in Access Healthcare Calculation.

The difference between the policy pricing is that the 2013 figure of $1750 is pre-ACA and would have been underwritten; risky customers were broadly excluded or, if allowed, were subject to exclusions and waiting periods.

Presumably, a program of healthcare for indigents requires significant parity of access for the individuals at all risk levels. One way or another, the costs of risky indigents has to figure in. Realistic “cat” pricing in 2013 would have been $2600 for a community rated policy, or would have averaged $2600 for a series of underwritten policies covering all ages/risks level in separate pools.

Bonus Segment 3. The United States’ series line in the chart above is not representative of either Forrest’s patients or the Medicaid population.

The charted figures for total healthcare cost of various nations shown above include basic medical care for the particularly expensive aged population, as well as the cost of custodial long term care for those, old or young, who receive it. In the US, these items are paid for in systems that are essentially separate from either the target Medicaid expansion population or Forrest’s patient panel.

Bonus Upshot of Bonuses.

  1. Adjust Forrest’s patients’ cost curve upward so it no longer excludes downstream care costs born by real patients;
  2. Further adjust Forrest’s patients’ cost curve upward so that it includes the cost of catastrophic insurance for the full range of real, non-aged patients, including the risky;
  3. Adjust the curve of the United Sates downward so it reflects the non-Medicare population and excludes long-term care expenses;
  4. Give the correct upward curving form to Forrest’s patients’ cost curve; and
  5. Viola — Forrest’s patients’ cost curve will look a hell of a lot like everyone else’s.

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