Good for you, GPPF!

  • AEG/WP accurately reported that health coverage costs real money.
    • Annual premiums are:
      • $8,829 in the individual market
      • $6,668 in the small group market
      • $5,845 in the large group market.

In the lowest priced large group, members of the vast majority of plans also are subject to at least some cost sharing (deductibles, copayments, and/or coinsurance). Accordingly, $5,845 represents a minimum annual health care cost for covered individuals without direct primary care.

Even with the savings resulting from direct primary care, AEG/WP computes large group market premiums for plan participants with direct primary care to be $5,592 per year.

It’s helpful to see realistic numbers on the Georgia Public Policy Foundation’s own website, because in the recent past the Foundation has advocated a Medicaid program built around direct primary care that was budgeted at on an annual cost of $2,500 per person, for a population to whom financially significant cost-sharing would be virtually impossible.

Automobiles are fast and affordable: a parable.

Dan Wildhirt [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)%5D

Automobiles are fast.

Only a few days after finalization of the AEG/WP report in May of 2019, in a city in the Midwest Region of the United States, data was collected for a study of automobile performance.

In this study, researchers operated 39 different automobiles for a distance of ten miles one or more times, for a total of 73 “time trials”. The collected data revealed that automobiles can cover ten miles in 172 seconds or less, and in some cases in fewer than 155 seconds. This represents a substantial improvement over the reported results for fast bicycles.

Automobiles are affordable.

A second group of researchers, in the very same month, conducted their own study of automobile pricing. They determined that automobiles cost $36,718 on average, with prices ranging from less than half to more than twice that amount.

Unfortunately, although the two studies were conducted in the same month, the researchers did not coordinate with their work. This makes it difficult to determine from the available data whether there might be a relationship between the performance of particular automobiles and their price. At least a few experienced analysts have proposed that an automobile priced at or below the average may perform less ably than higher priced cars. A special study in which performance data and price data are examined conjointly has been proposed as means to determine whether there is hidden link between performance and price.

Mischievous Foundations?

Early in 2017, I became aware of a policy initiative by the Georgia Public Policy Foundation the gist of which was to expand Medicaid in Georgia to more beneficiaries while, simultaneously, reducing the total per person expenditure on Medicaid to $2500 per annum. The Foundation’s plan also purported to eliminate the burden of uncompensated care on Georgia providers, especially hospitals .

At the center of the Foundation’s proposal lay two health care finance components:  a state payment of $750 per year to provide for each Medicaid recipient an annual membership in a Direct Primary Care clinic, and a state payment of a $1750 annual premium for a insurance policy providing catastrophic coverage.

Since Medicaid expansion under the Affordable Care Act costs at the time of the Foundation’s proposal substantially exceeded $6000 annually per covered individual, since $1750 per annum can buy only coverage with a  deductible far beyond the means of any Medicaid recipient, and since the Foundation’s plan removed the burden of uncompensated care from providers, the Foundation’s proposal turned on obtaining very substantial cost savings effects of beneficiary participation in direct primary care.  Starting at articles and links on Foundation’s website, I examined the evidence that direct primary care might be able to reduce the medical costs for a Medicaid beneficiary from over $6000 to a mere $2500.

In 2017 and early 2018, I wrote a series of posts arguing that direct primary care had not been, and could not be, shown to have massive cost reduction effects. I’ve transferred those posts to this blog, some with corrections.

Around the time the Georgia Public Policy Foundation (GPPF) was floating its Medicaid DPC proposal, North Carolina’s John Locke Foundation (JLF) was advancing the position that state and local governments could similarly cut costs by putting its benefited employees into direct primary care clinics. Both GFFP and JLF are state level versions of the Heritage Foundation, and both relied on Heritage Foundation material addressing direct primary care.

All three foundations tend toward strong fiscal conservatism. Certainly, if direct primary care has real value in reducing the costs of medical care, it would make sense that all three foundations would get behind firmly behind direct primary care.  At the same time, even if direct primary care does not reduce the cost of providing care, it may nonetheless give the appearance of reducing the cost of providing care. Then, it can be used to justify lower government expenditures for the health of Medicaid recipients and government employees.

Georgia leads the nation … into what?

“Healthcare Innovations in Georgia:Two Recommendations”, the report prepared by the Anderson Economic Group and Wilson Partners (AEG/WP) for the Georgia Public Policy Foundation, provides valuable material to deliberations about direct primary care. The AEG/WP team clearly explained their computations and made clear the assumptions underlying their report. This facilitates the public discussion that the Georgia Public Policy Foundation sought to foster in publishing the report. I will be examining those assumptions and various implications of the report in upcoming posts. I will also put the AEG/WP report into the context of other bits of an on-going discussion about direct primary care.

The gym club model. For healthcare?

Addressing those new to the idea, direct primary care partisans often start to explain the model by comparing it to membership in a fitness club with nearly unlimited access for a fixed monthly fee.

I’m puzzled.

Gym clubs are subject to high member churn rates. Is this wise for health care?

High churn owes in part to people signing up who then turn out for whatever reason to have low utilization. Low utilizers pay the same price as those who use the club’s resources more frequently. In the health care context, that seems similar to kind of subsidization built into the ACA’s community rated, full benefit packages. Yet, some of the most strident voices opposing such subsidization in Obamacare lead the charge for a primary care model in which low utilizers subsidize high utilizers rather than a model in which each person pays for the primary care they get.

The demand for time on the best exercise machines at gym clubs cycles up and down, varying enormously by time, day of the week, and date of the year. Periods of excessive demand are likely result of an unlimited access model. If your gym is slammed on January 2nd because of New Year’s resolutions, you just go home and no harm is done. Your unlimited access clinic and its two doctors might, on the other hand, be slammed with flu case appointments that, in the absence of “unlimited access”, might never have been made. If you need a truly urgent appointment, you might wish you had elected fee for service primary care.

Once fixed fee arrangements are in place, there is no “skin in the game” to keep a lid on overutilization. Yet, some of the same organizations that spent decades touting “consumer driven”, high deductible policies as an important response to overutilization, currently endorse prepaid, fixed fee direct primary care.

To pursue a revenue boost for its clinics, the direct primary care establishment seeks federal legislation that would allow HSA funds spent for direct primary care subscription fees to fulfill high deductibles. Yet, to a consumer, DPC membership fees work quite like payments of health insurance premiums in transferring most of the immediate, specific costs of a doctor from the patient to a different payer. Why do institutions that have long argued that “skin in the game” is paramount, specifically support taking skin out of the primary care game?

Direct Primary Care Poster Child Qliance has collapsed.

I  had  told  you  that would  happen  and  why.

It did, and now 25,000+ people have had less than a month’s notice to make new primary care arrangements. But the whole idea of direct primary care was to have been that these patients chose to pay a subscription fee to Qliance instead of maintaining an insurance plan adequate to their primary care needs.

Do Georgia conservatives still want to free direct primary care companies like Qliance from having to maintain reserves to assure that patients are protected when direct primary care providers go under? Somehow, I am sure they do.

Giant direct primary care pioneer Qliance has turned to online begging.

“No deductibles or copayments, but we have a coin box at the reception desk for your donations.”

Qliance, the first corporate provider of insurance-free direct primary care and one of the three largest, seems to be headed down the drain. It has taken to online begging at gofundme.com.

Not even ten days before the donation drive began, Qliance was the leading poster child for direct primary care. A Forbes article by Daniel McCorry and Katherine Restrepo said this:

Washington State is deservedly recognized as the birthplace and one of the most prominent frontiers for DPC, in large part because of Qliance. The Seattle-based DPC conglomerate is recognized as an exemplary market force in the private sector of health care.

They went on to praise the State of Washington for its exemplary DPC-friendly legal and regulatory environment.

Qliance was the first, and only, direct primary care provider to have Medicaid patients. It was the first to be part of a plan on an ACA Exchange. It operates in the best state for direct primary care. It has over 35K patients; and it has over $20,000,000 in annual revenues.

Despite these revenues, lenders have not been impressed with Qliance’s business model.  So, now that it needs to raise $1,000,000 in about ten weeks, Qliance has decided to beg. Today, gofundme; tomorrow, coin boxes at the reception desk.

If the crash of Qliance surprises anyone, it will be those with unrealistic expectations of what direct primary care can accomplish. The above-quoted article by McCorry and Restrepo, for example. promises such an intensive level of primary care that expensive “downstream” care, like specialist consults and ER visits, can be cut by 66% and 65% respectively. Eliminating all overhead expenses associated with billing and insurance is said to make all this possible, because doing so is presumed to enable physicians to reduce their patient patient panel size by fifty percent (50%) or more.

Actually, that’s inconceivable.

A 2014 quantitatively detailed, peer reviewed academic study of billing and insurance-related administrative costs for physician practices found that these came to thirteen percent (13%) of gross revenues. So physicians could drop their panel size by thirteen percent (13%) and increase their face time with patients by fifteen (15%).  [Hint: divide average length of patient visit by 0.87.] 15% more face time does not produce miracles.

But surely 15% more face time will help reduce “downstream” care a bit? Sure. In 2015, Qliance’s most recent report claimed to have reduced specialist consults and ER visits, but only by fourteen percent (14%). Seems reasonable, a lot more reasonable than 66%. And specialist and ERs are expensive, so maybe there’s some net savings here, even at 14%, right?

Maybe. But Qliance is obviously having trouble persuading lenders, investors, or partners that it can perform that well.

Where did those inflated expectations for direct primary care, like a 65% reduction in specialist visits, come from.  They came from a table by Qliance summarizing unpublished internal data from a 2010 investor pitch by Qliance. They were mentioned in a feature article written for the British Medical Journal in 2013. Though this was not a research article, the gaudily-high figures were passed off in a Heritage Foundation report written by McCorry, as “a British Medical Journal study of Qliance.”

Qliance knew better than to try to pass these wildly high numbers off as “a British Medical Journal study”. On February 6, 2017, McCorry, writing in Forbes, again published the numbers from 2010, but this time without any link or citation.  Now that Qliance is in dire straits, however, those exaggerated 2010 results  – now attributed to Forbes – have made their way into Qliance’s gofundme pitch; their more recent and more relevant but far less compelling results have not.  That is precisely why you, in your exercise of due diligence, should not donate to Qliance.

A final note. Reducing billing and insurance overhead can be accomplished by a single-payer system perhaps even more easily than by direct primary care. But whether the system is fee for service, single payer, or direct primary care, the physician’s conjoined choices as to the size of her patient panel and the size of her income are the dominant drivers of the amount of personalized care each of her patients receives, far more so than the mechanism by which she is compensated. More intense primary care may have some net positive benefit, at least up to a point, but there is no clear evidence that that benefit is unique to the direct primary care model.

Going insurance-free does not, and cannot, reduce the overhead expenses of primary care practices by 60%, or even 40%.

Updated 4/4/21.

About 13% of revenue (22% of overhead) according to peer reviewed academic research. 

I’ve back-tracked Katherine Restrepo’s and Julie Tisdale’s 2016 claim that:

By dealing directly with patients and filing no insurance billing whatsoever, DPC practices are able to eliminate 40-60 percent of their overhead expenses.

A footnote there takes you to a 2015 Katherine Restrepo article in Forbes that says:

By cutting 40 percent of overhead that is normally spent on getting paid by insurance companies, primary care providers can devote hour-long appointments to their patients and deliver care at a fraction of the cost. (Emphasis supplied.)

Meanwhile, follow the link in Restrepo 2015 to an article by a free lance reporter, who wrote this: 

Jay Keese is the executive director of the Direct Primary Care Coalition, an advocacy group representing DPC physicians, residents, and medical students. 

<snip>

“What direct primary care does is takes out all the administrative costs so the cost of getting paid for primary care is gone,” Keese says. “We look at that as a 40 percent cost differential. Currently 40 percent of a practice’s expenses are spent on getting paid. Because the doctor is paid directly in direct primary care, some of that savings goes to increase payment to the physician and some of that is just savings to the system.” (Emphasis supplied.)

Keese is a long time lobbyist and political consultant. He does have B.A. in history and he does have the delusion that direct primary care will not entail any administrative costs of getting paid: no costs for soliciting and negotiating direct primary care contracts with individuals, employers, or other payers; no costs of billing or processing payments; no membership cards or annual renewals; no bounced checks, late payments or defaulting payers.

IRestrepo-Tisdale 2016 does not explain the bump up to 60% from the 40% from Restrepo 2015 up to as high as 60. But a similar claim has more recently been put forth by Gayle Brekke whose blog post, on which I have already commented, says:

Between administrative staff, EMRs and other practice expenses driven by third-party payers, the overhead for a typical traditional practice is about 2.4 times higher than the overhead of a typical direct practice. 

What Keese (40%) Restrepo-Tisdale-Brekke (60%) do not have is any reliable evidence for these wildly inflated claims. 

Rather than rely on endlessly recycled alternative facts, look instead at this 2014 quantitatively detailed, peer reviewed academic study of “Billing and insurance-related administrative costs in United States health care“. Its evidence-based figure for billing and insurance-related costs in physician practices puts it at thirteen percent (13%) of gross revenues**. This works out to a bit over 20% of the estimated 60% overhead expenses for family practice physicians.

Even if going insurance-free could eliminate all costs of getting paid (it can’t), thirteen percent (13%) of revenues is a figure that could support primary care physicians being able to increase their time with patients, while keeping their income the same, about one-third.

A third more time is significant, but hardly revolutionary. Claims that eliminating all billing and insurance-related overhead will cut patient panels by half or more and triple regular appointment times up to the hour mark, and do it all at a fraction of the cost, are far out of line. 

Deduct any reasonable amount for the costs of getting paid, some of which will exist even for direct primary care clinics, and the ability of insurance-free direct primary care to work miracles of any kind is all the more questionable.  

No wonder it is so easy to explode the phony claims of savings made for such poster child examples of direct primary care as Qliance, Empower3 (formerly PHS) and Union County.

** Gayle Brekke’s bottom-line calculation, which is based on her misreading certain statements from a non-research article in which a single practitioner described his own solo practice, results in the nonsense of negative overhead: “a typical DPC practice” reducing a potential $13 of billing and insurance overhead per $100 of revenue by almost $22 per $100.