On DCP and the Law

Oct, 2017

There are now close to 1000 direct primary care (DPC) family medicine practices across the country, yet in most states the legal status of DPC remains murky. In 22 states laws have been passed that say that DPC is not insurance and not subject to the state insurance regulatory regime. Pennsylvania is not one of those states. The US. Congress could rectify this situation by passing a federal statute in this regard.

There are other things that Congress could do to make medicine more competitive and less costly. Currently the IRS has a tax regulation that says that monthly membership fees paid to your DPC doctor do not count as medical expenses and cannot be drawn from a Health Savings Account (HSA). Congress can direct otherwise.

Medicare regulations require a doctor to opt out of Medicare for 2 years if he wants to accept Medicare patients into his DPC practice. This is another regulatory hurdle that Congress could rectify with a stroke of the pen.

Even for family practice doctors who do not practice DPC medicine, the game is stacked against them and in favor of the large hospital systems. For example, hospitals that employ family practice physicians can afford to pay them more than private practices can offer. This is because Congress subsidizes hospitals in various ways, and in one form of subsidy hospitals are reimbursed about 40% more for providing the same outpatient services as a private practice family physician. Any subsidy, of course, enriches the hospital and makes it more difficult for private practice doctors to compete against the local hospital systems. So not surprisingly, hospitals now employ most physicians of all kinds, including those who practice only out-patient medicine; this limits competition and drives up costs for patients.

One of the worst cost drivers in the Affordable Care Act (Obamacare) is the “medical loss ratio” which limits insurance companies to a 20% profit on services covered. Would you rather make 20% on a $1000 charge or on a $10,000 charge? This is why insurance companies have not acted as a brake on rising costs, even though more expensive policies are more difficult to sell, especially to small business.

Congress could fix all this, and if it doesn’t then there will be increasing cries for “Medicare for All”, a “solution” that will further accelerate our trajectory toward national bankruptcy. To better understand why our national health care system works for the special interests and not for patients, I recommend the brilliant little book “Myth Busters: Why health reform always goes awry” by Greg Scandlen.

– Gary Gallo, MD