The Status of Possible Legislative Changes to Direct Primary Care (DPC) Arrangements
DPCs are the rare bipartisan health care reform that everyone loves, once they hear about them.
Quick Reminder: What is Direct Primary Care (DPC)?
Direct Primary Care arrangements are a subscription-based model run by primary care doctors outside of the insurance system, normally charging around $60-80 a month. Patients pay a monthly out-of-pocket subscription to have a dedicated primary care physician they can see or contact any time. DPCs are not insurance and they generally only cover, as their name implies, primary care services. I’ve previously written about them in more detail here and here.
How They’re Currently Regulated:
Within the Private Market
DPC arrangements aren’t treated as insurance by states. Over two dozen states have passed laws clarifying that DPC or DPC-like arrangements are not regulated by their insurance commissioners.
However, the IRS does treat them as a health insurance plan under Section 223(c) of the Internal Revenue Code (the section regarding Health Savings Accounts).
What this means is that anyone with an HSA + high-deductible health insurance plan is not allowed to also sign up for a DPC membership, because the IRS doesn’t allow for HSA enrollees to have a second health care plan.
And even if someone switched insurance plans away from an HSA-compliant plan, they are not allowed to use their saved HSA dollars to pay for a monthly DPC membership. FSA or HRA dollars also aren’t allowed to be used to pay for memberships. That’s because the IRS treats DPC memberships as a health plan and not as a qualified health expense.
Within Medicaid
There are many who see DPC as a way to improve access, quality, and lower costs within Medicaid. Standing in the way, however, are the rules surrounding payments to providers of Medicaid services. This is the relevant line:
(b) The State Medicaid agency must require all ordering or referring physicians or other professionals providing services under the State plan or under a waiver of the plan to be enrolled as participating providers.
In other words, if DPC doctors want to treat be able to see Medicaid patients (or more accurately have Medicaid pay for their patients’ monthly memberships), they must either be an existing Medicaid “participating provider,” or the state must receive a Section 1332 State Innovation Waiver to use Medicaid funds to pay them as non-Medicaid doctors.
What Would Help Direct Primary Care to Expand?
Monthly DPC memberships could be categorized as a medical expense, not as a health care plan. This would allow people with access to HSAs, FSAs, and HRAs to use those funds to pay for monthly memberships.
Short of being categorized as a medical expense, the IRS could also be directed to stop categorizing them as a health plan, so that the ~70 million people with HSAs would allowed to also pay for a DPC membership (with pre- or post-tax dollars) if they desired.
State Medicaid directors could be given the flexibility to be allowed to contract with DPC doctors, even if those physicians are not enrolled as Medicaid providers. The current requirement that states must go through a full Section 1332 waiver in order to move forward with possible experiments or just expanded coverage is quite burdensome. 1332 waivers don’t grow on trees. Legislation from Congress that allowed state Medicaid directors some discretion as to how they cover primary care for their Medicaid population would allow for much-needed experimentation.
The Two Bills That Could Change the DPC Landscape
The Primary Care Enhancement Act sponsored by Sen. Cassidy (R-LA) would handle some of the IRS and HSA issues. (There is a corresponding House bill sponsored by Rep. Smucker and co-sponsored by another 17 members.) The Senate bill is co-sponsored by Sen. Shaheen (D-NH), Sen. Scott (R-SC), Sen. Kelly (D-AZ), and Sen. Lankford (R-OK). The quick summary lays it out:
This bill allows a medical expense tax deduction for direct primary care service arrangements and provides that participation in such arrangements does not disqualify patients from making tax deductible contributions to health savings accounts.
The Medicaid Primary Care Improvement Act handles the required changes in Medicaid rules. It was introduced by Rep. Crenshaw (R-TX) and co-sponsored by Rep. Schrier (D-WA), Rep. Smucker (R-PA), Rep. Blumenauer (D-OR), and Rep. Pettersen (D-CO). The key details are:
This bill specifies that state Medicaid programs are authorized to provide primary care services through direct primary care arrangements (i.e., arrangements in which primary care providers receive a fixed periodic fee for their services).
What you’ll notice about them is that they’re both bipartisan bills.
Where They Stand Now
The Primary Care Enhancement Act, which handles DPC and the private market, hasn’t progressed in either the Senate Finance Committee or the House Ways and Means Committee. Each chamber’s bill is slightly different, so they’ll need to conference afterward to hammer out an agreement.
For example, the House bill wouldn’t allow prescription drugs (other than vaccines) to be provided (this seems unnecessarily restrictive). The Senate bill would allow the DPC membership payment to be deducted as part of the 7.5 percent medical expense tax deduction (although it seems like very, very few people would take advantage of this tax expenditure).
As for the Medicaid Primary Care Improvement Act, it passed the House on a voice vote back in March. Now it’s over to the Senate Finance Committee, where it will need bipartisan champions if it is going to make any progress.