Did direct primary care save Union County $1,280,000? Don’t bet on it. [Updated 1/6/18. Re-updated 1/13/20]

See 2020 update below.

A 4+ – year age gap between two health care enrollee pools explains a lot.

DPC advocates find their poster child.

A group of self-declared “fighters for health care freedom”, such as North Carolina’s John Locke Foundation and its Director of Health Policy, Katherine Restrepo, have been heavily promoting a health care delivery vehicle known as direct primary care, or DPC. They claim that direct primary care reduces health care costs and improves health care quality, primarily by having patients receive primary care through an insurance-free clinic. The savings in insurance overhead will presumably allow direct providers more time for patient primary care and that, in turn, curbs clinic members’ need for additional services outside the clinic like expensive specialists, emergency rooms, hospitals, and costly medications.

Ms. Restrepo found her poster child for direct primary care in tiny Union County, North Carolina. She tell us that, when compared to County’s average costs for the 1120 employee and dependent lives in the County’s more traditional insurance plan without DPC, direct primary care yields the County an impressive 23% cost savings amounting to a $1.28 million dollars a year, or $260 per employee per month. By another measure, the county is said to have 28% cost savings.

But there is good reason to believe that the reported savings are simply the result of selection bias. A an age gap of over four years between the two pools seems to explain a lot.

Here are just five of many possible avenues for selection bias that seem likely to affect Union County enrollment choices.

Beginning in the county’s 2015-16 fiscal year, Union County employees were given, for the first time, a DPC alternative to the county’s more traditional insurance plan.  If they elected the DPC, they received unlimited primary care, with no deductibles or copayments, but only through one of two doctors at the DPC clinic. If they declined DPC membership, they were allowed to see any primary care physician they wished, but they did so in traditional pay as you go practices subject to deductibles and coinsurance.

Despite DPC’s considerable financial inducements, 59% of Union County employees elected a traditional pay-as-you-go-with-doctor-choice plan over DPC’s all-you-can-eat approach. A highly probable explanation for this tilt to the traditional plan is that the narrow selection of physicians in the clinic is a barrier to enrollees unwilling to sever established relationships with their previous primary care physicians.

The strength of bonds to prior PCPs are likely to increase for patients who have had close relationship with their PCP, one fostered either by a history of serious health problems or simply by having had the same doctor for a long time. The narrow physician panel of the direct primary care clinic, therefore, could be a potent generator of age and health status selection bias adverse to the traditional plan.

Consider also that every new employee entering the county’s health plan has, since DPC became available, been defaulted into direct primary care. New employees are apt to be younger than the existing employee complement, so decisional inertia may be a potent source of age selection bias.

Furthermore, as part of her case for direct primary care, Ms. Restrepo points out that the DPC clinic is located near county offices, making appointments convenient for the hundreds of county employees working there. While this is likely to attract current employees into DPC, Union County’s health enrollment includes about 150 retired former employees, not yet eligible for Medicare, for whom the clinic’s location is no particular advantage. Since current employees are usually younger on average than retired employees, the clinic’s location may be a yet another significant source of age selection bias.

Next, consider the selection bias resulting from the special attractiveness to families with multiple children of DPC’s absence of copayments. Premiums (in either the DPC plan or the traditional plan) paid by employees with dependent children are the same for any number of children. But the larger an employee’s family is, the more significant the absence of copayments under DPC becomes. The DPC pool skews young by pulling in families with more children per employee.

Finally, at every signup or renewal point, there will be a certain number of potential members who know they are all but certain to exhaust their out-of-pocket maxima during the upcoming coverage period. Some may be in a hospital at the very moment of renewal. Some may be awaiting an already scheduled  surgery, a planned course of chemotherapy, or the delivery of a child. Some will just have chronic illness that exhaust their OOP year in year out.  Such members will anticipate having as many primary care visits as they wish without paying a financial penalty, even under traditional fee for service. For them, higher health care costs are themselves the source of a reduced incentive to choose direct primary care. 

And some of those who will expect to exhaust OOPs are likely to have particularly high claim costs. About 1.2 % of claimants in group insurance pools are so-called “high cost claimants”, with annual claims in excess of $50,000; Their average annual claims exceed $120,000 per person and combine to account for over 30% of all claims. Each high cost claimant that has leaned away from direct primary care will account for 10% of the claimed $1.28 million savings.

Are DPC advocates oblivious to age-cost curves or merely pretending to be so?

Unless asked a direct question, DPC advocates withhold that there is an age gap between the younger direct primary care pool and the older traditional insurance pool that exceeds four years.

Age matters though, and it matters a lot.

Age-cost curves for health care are steep. Many conservatives argue that the costs for 64 year olds are five fold higher than costs for 21 year olds; they argue that premiums should reflect this 5:1 ratio and nothing less. Of the 3:1 ratio mandated by the Affordable Care Act, JLF’s Restrepo personally complained that “Obamacare causes chest pain” because “[t]he old and sick [ ] benefit at the expense of the young and healthy”.

As an interim step pending legislation to establish a 5:1 ratio, the Trump administration once floated the idea of moving by administrative fiat to an age-premium curve of 3.49:1. On that curve, the age gap between the two Union City groups in age would explain every penny of a 23% difference between the health claims experience of the two populations.

A 5:1 curve would imply that offering the DPC plan cost the county nearly $600,000. Now Ms. Restrepo, the biggest booster of the Union County DPC, has gone silent on age-cost curves. Really.

[If direct primary care is indeed no better than traditional care at reducing overall costs, this is a very plausible number. The county paid the direct primary care provider an annual membership fee of $1500 per adult. Enrollees in the traditional plan received instead a health reimbursement account of not more than $750. Put otherwise, the county’s upfront pre-claims commitment on the direct primary care side is twice the size of its pre-claims commitment on the other side. If direct care had no economic advantage, half of the roughly $1,000,000 in clinics fees was simply wasted.]

Simply oblivious?

Neither high cost claims data that might cast light on risk distribution nor the age differential are addressed in current Union County DPC advocacy. Not even in an article, written for the Georgia Public Policy Foundation by Ms. Restrepo, purporting to “tackle the skepticism” over the “myth” of DPC cherry-picking – an article expressly citing the Union County experience for its “compelling numbers”.

Instead of addressing age differences or high cost claimants, Ms. Restrepo painstakingly breaks down Union County’s DPC enrollees by the number and frequency of their chronic conditions. But what does her article say about how traditional plan enrollees’ health status compares on these same measures? Not a word.

Even if DPC enrollees once picked turned out to somewhat sour cherries, they could easily be more palatable than the bitter lemons and high cost claimants that might have been found in the traditional insurance pool had anyone bothered to look.

Stop the rush to direct primary care.

Let’s not bet the health care of county enrollees, or anyone else, on the idea that little Union County won big savings by offering direct primary care. A far safer bet is that all Union County’s decisionmakers actually managed to do was segment their enrollee population based on health status, then proclaim an unjustifiable win for an unproven health care concept.

Note: for supporting calculations and other information please see certain Google “Sheets” here and here or use the “Contact” menu item above.

Update: See this post for some cost-adjusted data that confirms signficant selection bias, while still suggesting that direct primary care has net positive effects.

Direct Primary Care is not a magic bullet that will bring adequate health care to low income Georgia citizens. (Revised.)

Anticipating January’s complete Republican control of the federal government and a new legislative session in similarly red Georgia, Tom Price’s go-to Atlanta columnist, Kyle Wingfield, launched a call, with support and direction from their favorite Georgia think tank, the Georgia Public Policy Foundation, for a version of Medicaid expansion which may well also indicate the direction that other aspects of TrumpPriceCare will be taking in the coming months.

The pitch is introduced with the unsourced claim that ACA expansion is projected to cost $7300 per newly covered adult. That figure might be a bit too high; HHS has said that for 2015 the cost per enrollee was $6336.

The pitch itself is straightforward. Georgia’s Medicaid expansion plan should comprise, for each adult enrollee, a $750 annual membership in a direct primary care (DPC) practice coupled to a “true catastrophic” health insurance plan with an annual premium of $1750. The “D” in DPC stands for “direct” because primary care is delivered in an insurance-free setting, which presumably reduces overhead to the point where the practice can be sustained by the annual membership fee, without any significant additional cost sharing. In fact, going “direct” is claimed to reduce cost so much that a DPC can provide, easy, holistic, and near unlimited access to primary care givers, 24/7/365, and free basic lab tests and dozens of generic drugs to boot. Can membership in such a practice be had for $750 per annum?

Not likely.

The Georgia Public Policy Foundation itself posted an article, mere weeks after publication of the Wingfield column referred to above, singing the praises of a DPC practice serving a group of employees of Union County, NC and their dependents. It appears that neither Foundation, nor the piece’s author, was aware that that DPC charges an adult membership fee of $1500 per annum – twice the $750 in the Foundation’s proposal. (View the county’s DPC contract here.)

Know also that DPC practices do not cover specialist care, emergency room visits, inpatient hospital care, non-generic drugs, durable medical equipment, or more
complex lab tests. Medicaid expansion enrollees would be left to face these expenses with only the kind of “true catastrophic” coverage a $1750 annual premium will cover. Such a policy in the current market might be available person under 25 eyes of age. It would cost a 42 year old about $3000. And these policies come with $7000 deductibles, a level that has recently seen middle-income people howling with anger.

DPC advocates insist that the transformative power of holistic DPC practices will hugely reduce the use of specialists, the number of hospitalizations, and the need for expensive drugs. Who knows what low, low premiums might result, when DPC brings down total medical costs for DPC patients?

Actually, I do.

The answer can be derived from data presented by one of DPC’s most fervent advocates, Katherine Restrepo, Director of Health Policy at North Carolina’s John Locke Foundation. In fact, Ms. Restrepo is the author of the Georgia Public Policy Foundation’s Union County article mentioned above, one of many similar pieces by her,  attributing transformational wonders to that specific DPC plan. Will the Georgia Public Policy Foundation be surprised to learn that a careful analysis of the Union County program indicates that, Medicaid expansion under the ACA compares is an even better deal than the miracle that DPC has produced?

With her John Locke Foundation colleague, Julie Tisdale, Ms. Restrepo has provided an extended analysis of the Union County DPC program. Data is presented therein to contrast the costs and claims experiences of a group of 880 Union County employees and dependents enrolled in Union County’s optional DPC program against the costs and claims experiences of 1120 enrollees who declines that option. The latter chose Union County’s traditional insurance plan instead. While the data was generated for the  purposes of comparison, it necessarily tells us a lot about the costs and claims experiences of enrollees in the DPC. Assume for the present discussion, that the authors’ conclusion that the DPC program saved the county $1.28 million dollars is correct; I’ll dive into that question in a separate post.

Here is what we now know about fiscal year 2015-2016. For each adult, Union County pays a $1500 per year membership for enrollment in a DPC practice. 410 employees and 470 dependents are DPC enrolled. (I have posted my computations underpinning this discussion and, where needed, supporting citations online in a Google Sheet.) Union County HR Director, Mark Watson, has noted that 37% (326) of the enrollees are children.

Because people often need medical goods and services that go beyond primary care, Union County also insures its employees for specialist care, hospital care, non-generic drugs, and other items not furnished at the DPC. In the most recently completed fiscal year, according to the Restrepo-Tisdale article, Union County paid $4.17 million dollars in medical and prescription drug costs on behalf of DPC enrollees, through either the DPC membership or through its claims process for non-DPC needs.

For 880 enrollees, this works out to $4,738 in costs for each enrollee. But, since the DPC enrollee pool contains large numbers of children, visualizing what level of claims might be expected from a population which, like the Medicaid expansion population, is entirely composed of adults requires an adjustment. Conveniently, Union County offers optional coverages for spouse and family coverage at premiums proportional to costs. From the fact that the county charges exactly 1/3 more for a spouse and one or more children than it charges for a spouse alone, we can reasonably estimate that each child incurs claims at not more than 1/3 the rate of a typical adult.

The adjusted annual claims level for an adult enrolled in DPC works out to $6290 paid by Union County. Each year, DPC plan participants kick in an average of $591 per
adult in cost sharing. Enrollee costs and county costs combined come to $6881
per annum. Cost sharing for Union County employees is capped at $2000 per annum, and DPC plan participants face no deductibles. In other words, Union County backstops its DPC plan by embedding it in comprehensive traditional insurance coverage for items beyond the limited offerings pre-paid to the DPC provider. The employee coverage is equivalent to a platinum plan under the ACA; if this plan were sold on an exchange, enrollees could expect an annual premium of nearly $8000.

In place of sound insurance wrapped around a DPC, the Georgia Foundation’s plan offers only a $1750 premium subsidy for a “true catastrophic” policy likely to have a deductible of $7000 for an average adult. In Union County, the average annual adult costs for specialist care, for hospital care, for drugs, labs, equipment, and services NOT covered by the DPC limited list is well over $5000. Under the Foundation plan, that would only spell a near “catastrophe” in insurance terms every year for every recipient meeting or exceeding average annual care usage. For each impoverished recipient with such average costs, it would be a true catastophe, as well.

On the other hand, if the Foundation plan were to pay the $1500 per year DPC membership that Union County actually costs, and still maintain the plan budget of $2500 per enrollee, only $1000 per year would be left for catastophic coverage. There is no policy you can buy for that price.

Annual costs of Union County’s DPC scheme ($6881) for 2015 exceeded those of Medicare expansion ($6336) by over $500 per adult. But Medicaid expansion is an even better bargain than that. The average adult in the DPC group is a 39 year old full-time county worker. The Medicaid expansion population  is of similar age but less likely to have a good job, if working at all. On top of that, as I explain in a separate post, there is clear evidence that the Union County DPC enrollment has been cherry-picked; on the other hand, the Medicaid expansion population may even include a disproportionate share of people who, before the ACA came along, had been “lemon-dropped” by a health insurer.

The inadequacy of the $2500 per annum “DPC + catastophic policy” concept being flogged as a substitute for Medicaid expansion by Tom Price’s best Georgia friends ought to be obvious. If implemented, “catastrophic coverage” will gain a whole new meaning.

Donald Trump’s Medical Delusions

Link below is to Krugman column of 1/13/2017.

PK might be off just a little bit in saying that Republicans plans are “ALL about less”, and more skin in the game. Watch for Republicans to take just enough skin OUT of the game to put a patina of broad (if shallow), first-dollar coverage on their healthcare plan, something that will enable them to claim that Trumpcare covers more people, and does so with lower out of pocket expenses.

For example, a right-wing think tank and its favorite columnist in Georgia are currently flogging the notion that its Medicaid program should comprise a a “true” catastrophic plan (at an estimated annual premium of $1750) coupled with a membership in a “direct primary care” (DPC) practice (at an estimated annual cost of $750).

Even the very limited literature on the handful of DPC practices that actually exist does nothing to suggest “DPC + catastrophic” will result in adequate health care coverage. Something terrific, this isn’t. But this kind of plan could “cover” lots of people and a majority of them would have minimal out-of-pocket expenses. Great political coverage, great talking point – for the few years until a sufficient number of DPC patients meet their first need for something beyond primary care and realize they’ve been had.

Donald Trump’s Medical Delusions