Rising Cost of Healthcare Led to High Deductible Plans
At 16% of the GDP in 2008, US healthcare costs is the highest among the OECD countries. Employers, as the payors of most of the health insurance premium, have been dropping coverage or cutting back health benefit levels. This gave rise to High Deductible Health Plans (HDHP, aka Consumer-Driven Health Plans, CDHP) which increases the dollar amount the covered individual has to pay before insurance coverage kicks in.Often an employer offers HDHP in combination with a Health Savings Account (HSA), so employees can put aside pre-tax money for healthcare expenses. The minimum deductible amount before HSA can be offered often becomes the HDHP's deductible amount. For 2013, IRS has set this minimum threshold to $1,200 for an individual and $2,400 for a family. For some employer-sponsored plans, the deductible has been set closer to the upper limit of $6,050 for an individual and $12,100 for a family.
Doctors Respond by Offering Direct Pay Medical Practice
As a result, individuals and families become responsible for a growing portion of their healthcare expenses before insurance will pay for anything. While this is happening, some doctors have chosen to move to a Direct Pay model because billing and collecting from insurance (including Medicare and Medicaid) have become such a burden that they would rather opt out of the system. They charge a cash price and get the payments from the patients rather than work with insurance:- Some offer lower cost medical services to everyone who pays out-of-pocket - Portland and Seattle providers work with Sprig Health to list their services and prices. Zoomcare makes their basic office visits available for a cheaper price if you pay cash. Their cash price is 30% lower than what they would charge insurance.
- Some other doctors set up Direct Primary Care clinics that charge a monthly subscription fee to provide primary care services - Qliance in Washington State charges $50 a month and up. MedLion operates similarly in California.
Risks that May Prevent Direct Pay Success
These innovations are transforming how health care is purchased and delivered, hopefully with a result of lower costs and better health outcomes. However, there are a few issues that may choke off these innovative ideas before they have a chance to flourish:- PPACA may make the practice of buying healthcare out-of-pocket impractical.
- The Patient Protection and Affordable Care Act (PPACA) requires that preventive care services be covered by insurance and individual states mandate certain minimum coverage limits. Real high deductible plans (e.g. $5,000 or above) may become illegal for small group plans. If the deductibles are lowered, people will have a lot less incentive to subscribe to a Primary Care plan or pay out-of-pocket for their incidental care. Lower deductibles aren't bad in themselves but many observers expect to see rising insurance premium as a result.
- Employers may continue to reduce what they are willing to contribute in health benefit.
- With the Direct Pay model, patients have to pay out-of-pocket for healthcare. Currently, some employers are willing to pay for a Direct Primary Care subscription or reimburse some out-of-pocket expenses (using HRA) as they increase the health plan deductible. These funding may dry up in the future. When that happens, will patients pay their own money for necessary preventive or sick care? If not, those Direct Pay medical practices will not survive.
- Doctors cannot see Medicare and Medicaid patients while practicing Direct Pay.
- Medicare and Medicaid require that a doctor charges Medicare patients the lowest price for any service. However, the doctor can charge a Direct Pay patient less because he does not need to go through insurance billing and collection, which often reduce the doctor's take up to 50%. Practically, this means a doctor can't offer attractive Direct Pay pricing if he or she sees Medicare patients. Many doctors are not yet ready to turn away Medicare and Medicaid patients.
Why Should We Care?
PPACA has been written to expand health insurance coverage but it does not have the teeth to bring down the growing cost of health care. We need to allow innovative models such as Direct Pay (including but not limited to the Direct Primary Care clinics) have a go at lowering the cost of healthcare.The goal of extending coverage and providing preventive care in PPACA is commendable and valuable. However, some of the mandates in the law may force us to stay on the track of uncontrolled healthcare costs, which will lead to higher insurance premiums and eventually unaffordable and thus lower coverage. That would defeat the purpose of PPACA. Do you agree? Does your political leaning (left or right) influence how you feel about this issue?
