In an e-book and blog about paying for primary care, Gayle Brekke presents an argument laced with actuarial theory and jargon, calculations, notes, and citations. An appearance of scholarly pursuit and mathematical precision is thereby created; in both blog and e-book Brekke makes clear that she is an experienced actuary who is also deep into a Ph.D. candidacy. But, mostly, it’s all nonsense.
Brekke’s core claim is that paying for primary care within the traditional health insurance system costs at least 50% more than paying for primary care with direct patient to practictioner transfers. Brekke reaches that conclusion in four key steps, each of which gets its own chapter.
- Provider-side administrative costs associated with insurance comprise half or more of primary care provider overhead, this adds about 28% to insurer payments to providers.
- Insurer-side administrative costs, including profits, require insurer premiums to exceed insurer payments to providers by over 17%.
- The presence of insurance results in at least 5% induced utilization of primary care services.
- Fee for for service insurance coverage incentivizes primary care providers to perform unnecessary primary care services far more than any direct payment system.
Point by point, here are the principal failings of Brekke’s analysis, and a fifth point on which her analysis fails in a more global way. The superscripts link to detailed analyses.
- The data sources Brekke cites here simply do not support the huge difference in overhead costs she attributes to them.[A] Still, meaningful data related to Brekke’s point is available and it suggest a far smaller difference.[B]
- Brekke offers no supporting data; she simply but incorrectly assumes that each and every insurer will in all cases set premiums that capture the maximum administrative costs and profits allowable under MLR rules. There are many reasons this cannot be assumed, e.g., where insurance markets are competitive or where public insurers have low administrative costs and earn no profits. There is plenty of data available. [C]
- Even Brekke admits there is no data to support the 5% minimum amount she assigns to this factor. Given that insurers have available counterstrategies (e.g., cost-sharing) to curb moral hazard, the matter is wide open. Further, Ms Brekke preferred alternative to insurance is subscription based direct primary care, in which cost-sharing is akin to heresy. Actual data comparing induced utilization for direct and insured primary care might very well show an advantage for insured care.[D]
- Brekke offers no data to support the proposition that insurance based FFS physicians initiating medically unnecessary services is a serious problem. More importantly, Brekke fails to grasp that DPC’s extended visit times and same day scheduling might also be a form of well-paid, medically unnecessary feather-bedding. The corrupt will find a way in any system. Brekke has no cause to assume that traditional PCPs are any more corrupt than D-PCPs.[E]
More generally, at no point does Brekke even seem aware that insurers sometimes contribute to containing primary care costs. The most consequential of these contributions is almost certainly that, even in the face of a PCP shortage, an insurer representing the market power of tens of thousands of consumers can somewhat restrain PCP compensation. If that seems no big deal, ask any D-PCP if low payment rates were an important consideration behind her migration from insured care.[F]