Including Primary Care in Health Insurance Policy Coverage with Insurance Is Reasonable

The missing part 5 of Brekke’s “Paying for Primary Care”, a comment.

Under the traditional insurance model, patients receiving covered primary will indirectly pay significant administrative costs, but they may also gain compensating financial advantages that Gayle Brekke’s multipart “Paying for Primary Care” series fails to recognize, ignores, or minimizes. At the top of the list, insurers bring the combined strength of large numbers of insureds to negotiating payment rates with all providers, including PCPs. Even though providers may have the upper hand generally, insurers’ primary care payments rates are usually significantly cheaper than self-pay rates. That advantage alone may cover the administrative costs of insurance in their entirety. But the financial advantage of insurance does not end there.

Insurers actually pay about 85% of downstream costs. D-PCPs pay not a penny. This gives insurers a bigger financial stake than DPC clinics themselves in DPC’s loudly professed goal of controlling downstream costs. And insurers have some tools to make it happen. 

For instance, insurers may use their unique access to both downstream care and cost data and to other primary care quality metrics for each and every PCP on their roster to reward success with incumbency and, when necessary, discharge failure. Curating rosters to maintain, monitor, or upgrade the quality of their PCP team comes at a price, but the investment offers the possibility of reductions to downstream care costs through the improvement of primary care.

Direct pay has no comparable institutional mechanism. Indeed, direct primary care might even provide a haven for PCPs kicked off insurer network primary care rosters1.

Insurer’s integration of primary care and downstream care affords other opportunities for gleaning downstream cost reductions. For example, some insurers leverage integration ”upwards” by sending their PCPs timely, automated updates of individual patients’ downstream utilization. Insurers also leverage “downwards” by collecting  network wide health metrics from their PCPs  to identify actionable specific needs, then formulate responses (e.g., adjustments to drug formularies). Such gains from systematic integration will entail certain “administrative” costs, but may provide modest net benefits that are not available when primary care is delivered as a literally dis-integrated financial standalone through DPC. 

Direct primary care practitioners talk a good game about primary care reducing downstream care costs. But, since insurers write the checks for downstream care, insurers have the deepest and most direct financial incentive to see that their PCPs play a primary care game that actually leads to downstream care cost reductions.

One caveat. Any given insurer’s financial stake in taking positive action today to reduce downstream care costs later will be, to a degree, attenuated by the expectation that their insureds may have changed insurers by the time some of the fruits of “prevention” are realized. On the other hand, attenuation for that particular reason is probably considerably reduced for publicly funded health insurance and for self-insuring employers. However, even where an insurer can expect relatively high churn year-over-year, as in the individual market, the benefits of a good primary care game played today still produce good financial results next week, next month, and throughout the current policy year. On the penultimate day of a patient’s final policy year, her insurer could still have a larger direct financial stake in tomorrow’s downstream care than her D-PCP. And D-PCPs see member churn as well — one prominent DPC advocate has written a whole book about it.

All PCPs, no matter the payment model under which they practice or the compensation they accept, have the identical ethical and legal incentives to provide care that reduces the need for and cost of downstream care. To the good work of dedicated and honest PCPs, using insurance to Pay for Primary Care adds what direct pay can’t — both more of the will (though direct financial incentives) and some important ways (through institutional structure) to shape primary care for the goal of lower downstream costs. Reckoning the net financial effect of Paying for Primary Care with insurance requires attention to both administrative cost burden and to likely or potential benefit.

Inevitably, selling a direct primary care product built around unlimited numbers of nearly on demand thirty minute visits at a fixed price leads D-PCPs to claim that traditional primary care practice is a failure because it supplies a smaller quantum of primary care services than subscription DPC. 

Does the traditional model supply too little primary care? Precisely because they attach high value to primary care, the vast majority of insurers set low financial barriers to primary care access. A significant majority of insureds have primary care without application of deductibles; a majority of those both in the individual market and in employer groups see PCPs for a copay of  $40 or less. A large fraction of insurance plans provide a set number (2 – 5) of primary care visits per year with no cost-sharing of any kind. And all insured primary care comes with zero cost sharing for a battery of the most important preventative services, like immunizations (flu, covid) and screenings (e.g., PAP smears).

But because primary care is both useful and expensive, insurers seek to optimize the quantum of primary care delivered rather than simply maximizing it. So, while insurers are invested in seeing that patients get all the primary care that is medically reasonable and necessary, they also guard against services rendered in the name of primary care that is neither. For example, some D-PCPs actually commit to a minimum thirty minute visit length; at least one prominent D-PCP has set a 45 minute minimum; and a survey of DPC practices reported an average of 38 minutes. Note that by that standard, a substantial majority of all family physician visits fall well short on ever single day of work of providing what DPC docs would automatically deem appropriate care. Primary care specialists properly seek, and insurers properly allow, a “99214” or “99215” for less than forty percent of primary care visits. Just as they do for other elements of healthcare for which they are on the financial hook, insurers examine claims to squeeze out losses from abuse and overuse. It essentially impossible for self-payers to do this kind of “police work”.

As we contemplate the possibility of overuse, our attention turns to the elephant in the DPC room: unlimited visits without cost sharing. That practice entails costs inflated by moral hazard. With no one obliged to pay even a penny for an additional visit, and all paying the same flat membership, the price of membership must be high enough to pay for all needed primary care and for all the “induced utilization” that results from having unlimited visits with no cost sharing at all. 

Insurers have shown that the tension between the value of low cost barriers for primary care and the costs of moral hazard can be modulated by, inter alia, a balanced approach to cost-sharing. But this is far off-brand for subscription DPC, a model that seems almost premised on the idea that primary care can never be overused. DPC’s unique model greets moral hazard at the door, then bars the door to the insurance system’s best tools to mitigate moral hazard. 

Once again, we have an insight into why DPC is expensive. After insurers’ efforts to optimize primary care for cost-effective reduction of downstream care risk and cost, primary care total spend is about $450 per year for an adult, privately-insured patient. That’s 50% less than the $900 spent for an annual direct primary care subscription.

As insurance companies are human institutions, not all aspects of insurance practice will have stunningly cost-effective results. The most effective cost control measure is almost certainly the ability of insurance companies to restrain, somewhat, provider reimbursement rates; these may alone have enough payoff for patents to justify all the extra costs of insurance. At the same time, because PCPs as a group are highly competent, evaluating physicians with quality metrics or downstream care cost comparisons may bring only modest net benefits (and can be dropped if not effective). Lying somewhere in the middle of the cost-effectiveness scale are insurance rules and processes that target fraud, abuse, overuse, or moral hazard; that these rules have real bite is made clear by the squeals of D-PCPs over denied claims.

In any event, Brekke’s method of accounting only for the costs of performing administrative tasks avoided with direct pay without accounting the financial benefits added when insurers perform those administrative tasks helps explain why Brekke’s conclusion is at war with observed reality. Traditional primary care at $450 per annum is half as expensive than $900 per annum subscription-based direct primary care.

The overwhelming majority of DPC advocates confess what Brekke will not. That subscription direct primary care is more expensive than insured-based primary care. Then, they argue that DPC is worth the added cost because (a) vast increases in the quantum of primary care are really, truly, cross-my-heart-and-hope-to-die cost-effective in reducing downstream care costs, so that DPC results in net savings despite high DPC fees and (b) that DPC gives a superior patient experience. 

There is essentially no evidence that the first proposition is true. In fact, there is thus far only one actuarially sound, independent investigation of DPC, and the investigators concluded that $900 a year DPC was a break even proposition. Even that study appears to have substantially overstated the case for DPC. Perhaps most tellingly, organized DPC has stood adamantly against D-PCPs actually sharing the risk of downstream care costs. 

Does DPC even deliver on the promise of expanded primary care? Only a few DPC clinics have actually reported their primary care utilization figures. One such braggart’s report actually revealed an average of well under two annual office visits per patient, with the only other live contacts being telephone calls at the rate of one every two years. The good news is that the sheer inconvenience of clinic visits may keep moral hazard in check.

The bad news is that this clinic’s annual adult fees exceed $1000 for that pretty ordinary care regime. If DPC patients get neither lower downstream costs nor significantly more primary care than they would get through a $450 annual spend under the traditional model, what do patients actually get when they pay twice that amount directly to a D-PCP? 

The aforementioned improved patient experience, right? 

DPC patients are not just Paying for Primary Care. They are buying a bundle of medically necessary primary care paired with medically unnecessary “concierge” services. The concierge add-ons are made possible by DPCs having small, but very well-paying, patient panels. Precisely because concierge services are not medically necessary, and because insurers have not found such services helpful in reducing net costs, insurers have neither a duty nor a reason to pay for them, let alone to police their price. Concierge care is an optional convenience or luxury product, not unlike amusement park queue jumping. A PCP will try to sell it at the best price he can get directly from a patient. 

Added concierge services and/or inflated PCP compensation accounts for the vast bulk of the $450 excess cost of direct primary care over insured, medically necessary primary care. For marketing and other financial reasons, D-PCPs masquerade the concierge component of their product as an economic and medical necessity. But concierge medicine, even in the “lite” version called direct primary care, is expensive and unnecessary. It is just something nice for both patients who can afford it2 and for the physicians who for their own reasons — laudable or otherwise3 — prefer that model. 


1 If a PCP had been formally admonished for negligent practice by his state medical board in 2009, would you be surprised to learn that he started his state’s first ever DPC practice that very year? Don’t be.

2 In discussing multiple forms of moral hazard in Part 3 of her series, Brekke wrote, “physicians may recommend more and more expensive care when they know the patient is insured.” I suggest a more inclusive rewrite. “Physicians may recommend more and more expensive care when they know they can get paid for it, whether through insurance or from direct pay patients with ample non-insurance resources.” There is no demonstrable reason to believe that D-PCPs are necessarily less inclined to profiteering than their FFS-PCP counterparts.

3 Some D-PCPs are true believers. But consider also how attractive DPC must be for those who run afoul of insurer’s effort to police abuse or overuse, or for those who might be unwelcome in networks. Sometimes PCPs ditch insurance network contracts . Sometimes insurance networks ditch PCPs. See note 1 supra.

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