Do economic forces lead to healthier patients self-selecting to member- funded DPC practice?

And, favorable selection to member-funded DPC is likely even greater than that already actuarially documented for employer funded DPC.

[D]o economic forces lead to healthier patients self-selecting to a DPC practice? . . .

. . . The value proposition for chronically ill patients– needing frequent visits and savings on ancillary services (labs, meds, etc.)– is obviously higher. Given this, the bias for patients seeking care in the DPC model would lean towards sicker patients; not towards healthy people who don’t expect to have great medical needs.

R. Neuhofel, 2018.

In those words, a founding member and then-current-president of the Direct Primary Care Alliance asked an important question and provided his answer. That answer has been offered time and again, before and since, by DPC advocates. It’s also an answer with some significant truth; I address below why it is also a profoundly incomplete answer. But let’s start with some relevant evidence that points away from Dr Neuhofel’s conclusion.

Dr Neuhofel mentioned that studies of the demographics and health status of DPC patients were underway. And, in May 2020, we learned the results of the only independent study of DPC conducted by actual actuaries, that by a team from Milliman on behalf of the Society of Actuaries. That study found that patients electing a direct primary care option as part of their comprehensive employer health coverage had a significantly more favorable health status than those who elected a competing fee for service primary care option. The difference, in fact, contributed substantially to the reduction of what was once the DPC world’s poster child brag to post-Milliman rubble, from “Union County saved 23%” to “Union County lost 1%” .

The Milliman’s team finding is not wholly dispositive of Dr Neuhofel’s question. For one thing, it was only a single study of a single employer’s program. Other employer’s programs might be different, although no one has expressed any general reason to expect a significant departure. In fact, the only post-Milliman report of measurement of health status of the members of an employer’s DPC plan and its FFS plan indicates a selection bias differential that falls within 10% of that observed for Union County.

More importantly, direct primary care provided through an employer as part of a comprehensive health coverage package differs in potentially consequential ways from direct primary care offered directly to consumers by DPC clinics. The Milliman team itself suggested that might be the case, largely echoing Neuhofel in its rationale — and fleshing that out with an interesting example:

Members choosing to enroll in DPC and pay on their own may be less healthy simply because they are better able to justify the recurring monthly DPC membership fee (which is likely in addition to major medical insurance premiums) than members not choosing to enroll in DPC on their own. For example, assuming copays of $35 and $50 for PCP and specialist, respectively, under traditional coverage, an individual with a chronic condition would only have to see either a PCP or specialist roughly twice a month on average (total cost of $85) to justify paying the DPC membership fee, where there are typically no copays. Members without the need for this level of recurring primary care may be less likely to see the financial value in enrolling in a DPC practice.

It is all but a given that among potential members with differing health status, if their ability to manage health costs coverage remains otherwise identical, the less healthy will have a stronger incentive to enroll in direct primary care. The problem with relying on this truism is that potential members will often not be “otherwise identical” in their ability to manage health costs, particularly when they do have differing health status.

Health status and health insurance

The sick may be “better able to justify” add on DPC fees, but as their level of sickness increases they are also increasingly “better able to justify” the higher monthly premiums of benefit rich policies, with lower cost-sharing, including lower deductibles and lower mOOPs. This is plainly an adverse selection environment for low deductible plans, the sicker one is the better the “value proposition” of gold policies over, say, bronze. This is demonstrated over millions of policies each year in the individual market.

But paying DPC fees is far less valuable for gold buyers than it is for bronze buyers. DPC is worth a lot less to those who hit their deductibles than to those who do not. So, the adverse selection into low deductible plans, leaves a pool with lowered sickness levels for DPC.

Consider the exact example offered by the Milliman team as quoted above: potential plan members who anticipate two dozen office visits in a coming year, half of those to specialists. They are so obviously not healthy that the vast majority of them likely have bigger medical cost worries than their primary care copayments. The vast majority of them, whether with employer or individual coverage, are happily avoiding high deductible plans. And even those whose coverage comes from the 20% of all employers who offer only high deductible plans are incurring medical costs at a level that not only exceeds their deductible ($2300 for an average employer HDHP plan in 2020), but approaches or exceeds their mOOP.

In any case, even among the relatively small universe of potential DPC members who are strictly limited to high deductible plans, and even given that the “least sick” have less reason to choose DPC than the “somewhat sick”, the “somewhat more sick” may see smaller net gains when from choosing between DPC and making cost-sharing payments, while the “OMG even more sick” may see net losses from the process.

So yes, even within an obligate high deductible sub-universe, there is likely to be a “Goldilocks” level of sickness at which is DPC the best value proposition. But beyond that point on the sickness axis, the net economic selection force for DPC is gradually diminished, then reversed.

Age, risk, and premiums

Under the ACA’s age banding system, even in the unsubsidized individual market, premiums for young are disproportionately high, making insurance less attractive to the young than the age-based odds warrant. In the subsided market, moreover, the premium skew against the young is actually magnified by the subsidies. Yet, for those who are both relatively young and relatively sick, insurance remains attractive. The upshot, as predicted (with a mix of crocodile tears and evident glee) by some ACA opponents, has been a disproportionate share of the young and healthy opting out of insurance coverage altogether, or choosing high deductible coverage.

DPC clinics benefit from the resulting enrichment of youth and health in the resulting pool of likely enrollees..

To be sure, of those have no (or reduced) insurance coverage, the least healthy are more likely to select DPC as Neuhofel would predict. But each of those drawn in will have been drawn from a group enriched with youth and health — they will be no more than the “sickest of the least sick”, a tail likely insufficient to wag an entire dog.

In the employer-based insurance world, age-driven effects are mitigated because employee shares of premiums are essentially level over all adult ages. DPC enrollment under employer DPC options is, therefore, not subject to the age-driven influx of good risks described above. Accordingly, we would expect consumer-paid DPC to have an even larger selection bias in their favor than the substantial selection bias already documented for employer paid DPC.

Wealth and social determinants of health

Another way in which economic factors leads to a disproportion of healthier patients in DPC panels is less direct, but likely consequential. Consumer-paid DPC is more accessible to those financially better able to add monthly DPC to whatever other financial arrangements they have for health care. Having a higher income helps in buying anything. As well, consider that high deductible plans that work best with DPC are also more financially accessible to those with accumulated savings.

In whatever form it takes, the same financial advantage that inevitably facilitates payment of DPC fees and election of high deductibles correlates with a long list of social determinants of health, such as the availability of stable housing or employment. A broad wealth/health nexus is real and well documented. That nexus pushes the mean of consumer-paid DPC panels in the direction of a healthy population.

Note, too, how this issue of economic status again distinguishes employer-paid DPC from consumer-paid DPC. When an employer offers DPC to all employees, any wealth/health effect pushing employees toward DPC is attenuated. Accordingly, on this score as well, consumer-paid DPC choices should actually skew healthy relative to comparable employer-paid DPC options already demonstrated to skew healthy.

Some DPC advocates claim to serve more than a few uninsured subscribers. As I have suggested, at any level of income at which the choice to be uninsured is voluntary, the population so choosing will skew healthy. But what of those whose low incomes make the purchase of insurance impossible?

There is a large population with incomes below the poverty line that have no realistic possibility of paying for insurance coverage. Low incomes even skew high risk. Does the low income population significantly tip the balance of DPC panels? In over two-thirds of the states, they are Medicaid eligible. But in the remaining “non-expansion” states, there is a population in poverty who are eligible for neither “expanded Medicaid” nor for ACA subsidized private insurance. How many of these can muster $75 a month for a DPC membership? Arguably, some of the most sick of these might be able to justify DPC as the closest they can get to insurance. But note that many of the sickest of the poor can eligible for traditional, “unexpanded” Medicaid and/or Medicare coverage by reason of disability.

I’ve seen no evidence that DPC seeks or obtains significant numbers of sub-poverty level subscribers, let alone whether the handful they may get skews high risk.

Casual shout out. I know D-PCPs who are doing great things for some quite sick, low income, uninsureds, even doing tasks for which they would refer their insured patients to specialists. And here’s a second shout out to FFS-PCPs who do the exact same thing.

Hard actuarially sound evidence has already shown that employer-DPC skew young and healthy. We await comparable study of the demographic and health status of consumer-paid DPC.

Still, when we put the value proposition of DPC for the sick vs DPC for the well in the context of a broad, real world dynamic of available economic factors, it is far from obvious that consumer-paid DPC skews sick. Instead, the economic considerations point toward consumer-paid DPC skewing young and healthy — to an even greater extent than already demonstrated in employer-paid DPC.

After noting, as above, how employer-paid DPC seems likely to mitigate some of the selection pressures toward the sick in consumer-paid DPC, I gave some thought as to whether there were other structural differences tied to payment source that might predict other differences in skew. Paying DPC fees out-of-pocker puts more patient “skin in the game”; one predictable consequence would be to increase the tendency of the healthiest potential to eschew DPC; on the other side of the previously suggested “Goldilocks” point, however, employer payment of the DPC fee liberates the least healthy potential enrollees from the risk of unnecessarily leaving their own money on the table. Pending an injection of wisdom from somewhere else, I will reserve opinion on the net effect of transferring this bit of skin in the game until we see some actual study results.

Even so, I’ve seen enough to now attempt to monetize this blog in the following way. I will bet that the first credible, independent academic or actuarial study of the health status of broadly representative consumer-paid DPC patients shows that as a group they are healthier than the average commercial patient population. I invite those who disagree to negotiate with me an even-money wager contract in an amount sufficient to both provide significant stakes for the winner and to fund adjudication of a win through standard arbitration procedures. I am happy to afford each of us the opportunity to put our money where our mouth is, and into a escrow account.

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