Remind Me Why We Have Insurance

By Kim Bellard, September 24, 2012

A recent article in The Columbus Dispatch reported on the practice of doctors providing discounts to patients if they paid directly instead of using their insurance.  It got me thinking about far health insurance has strayed from its original purpose.

We ask health insurance to do a lot of things: lessen concern about catastrophic expenses, reduce financial barriers to care, smooth out cash flow of health expenses, even help us manage chronic conditions via disease management and wellness programs.  Insurance does these things because, frankly, there haven’t been many good alternatives.  But that doesn’t mean there couldn’t be.

The Affordable Care Act -- ObamaCare -- requires expanded coverage for preventive care with no cost-sharing, on the premise that this will help people get those serves.  It troubles me that some, perhaps most, people won’t get necessary preventive services unless it is “free” to them at point-of-care.  That tells me something is really, really wrong with how we look at health.  But why does health insurance needs to be the mechanism for providing incentives to take care of one’s own health?

The Dispatch gave several examples of physicians and hospitals offering significant discounts – up to 40% - to patients who pay directly, in order to avoid the administrative burdens of dealing with health insurers.  It also quoted Tom Blue of the American Academy of Private Physicians as indicating they believed there were 4400 physicians nationally who replied in part or entirely on direct payments from patients, although that would seem to include uninsured patients. 

A more direct patient-physician financial relationship may be an idea whose time has come…again.  So-called “concierge medicine” started several years ago, and has developed to the point where it has its own trade association, the aforementioned American Academy of Private Physicians.  The concept of concierge medicine is that patients pay a fixed fee, monthly or annually, and in return they get guaranteed 24/7 access to their personal physician.  No insurance, no billing, no out-of-pocket payments.  

Examples of concierge practices include EliteHealth, MDVIP, and SignatureMD,  There’s even a television series featuring a concierge practice, USA Network’s Royal Pains.  Prices for concierge service vary widely, with some practices aimed at wealthy families and costing tens of thousands per year, while others are more affordable at $1,500 - $2,000 annually.  Proponents believe it greatly reduces the number of patients physicians have to see, reduces hassles with third party payors, and ensure a closer, more accessible physician-patient relationship.

Then there’s “direct primary care” model.  Like concierge medicine, patients pay flat fees for access to personal primary care physicians.  The lines between the two approaches are somewhat blurry, at least to me, but direct primary care tends to use monthly fees instead of annual retainers, and appears to be generally less expensive, often under $100 per month.  It also has its own trade association – Direct Primary Care – and has had legislation passed in both Oregon and the state of Washington to specifically allow the approach. 

Examples of direct primary care practices include Qliance and MedLion.   The DPC website lists over 80 practices in 19 states, some of whom are also listed in the American Association of Private Physicians website.   DPC argues that by cutting out insurers and the practices expenses devoted to billing and administrative hassles associated with third party payors, direct primary care can save 40% of the health care dollar.   

Concierge medicine and direct primary care both emphasize primary care and flat payments to cover essentially unlimited access to primary care services (and, in some cases, many routine services).  Both seek to eliminate insurers from the equation.  It’s interesting that while these efforts are happening, Medicare and many insurers are experimenting with patient centered medical homes (PCMH), which also seek to reestablish primary care as the centerpiece of a patient’s health care needs.  In the PCMH model, of course, insurance is still very much part of the picture, providing additional financial support to the involved primary care physicians.  In an ACO world, though, health insurance may be less integral to PCHM practices.

For all these models, I can’t help but be reminded of 1990’s capitated gatekeeper approaches, which also featured fixed per-member payments (from insurers) and primary care physicians coordinating all care.  It will be interesting to see how these new approaches – concierge, direct primary care, or PCMH – deal with patients with complex needs.  Just as there was with capitation, there will be financial temptation to triage them off to specialists who are still on fee-for-service, and there will be similar concerns about such practices skimming off healthier patients, not to mention wealthier patients. 

I don’t know if concierge medicine or direct primary care will ever evolve out of niche offerings, and their development will be interesting to watch.  The model I think is potentially even more disruptive to the current system is the encroachment of corporate approaches to retail medicine – e.g., TakeCare, Minute Clinic, Walmart’s recent entry into immunizations, among others  All of them work with health insurance, because that’s where the money is now, but all are also quite happy to take consumer’s money directly and to do so in a way that is more like we buy other goods and services, with clearly delineated lists of services and prices.  If other parts of the health care system think those kinds of approaches aren’t coming to them, they are deluding themselves.

Two things I feel strongly that our health care financing mechanisms should achieve is that low income people need assistance with paying for health care services, and no one should have to go broke due to medical bills.  Even for those, though, I can think of solutions which do not require health insurance.  As for cash flow management and chronic condition management, health insurance may actually be one of the less efficient solutions to address those. 

I am not saying there shouldn’t be any sort of health insurance, but given the mess we find out health system in – expensive, uneven access and quality, high administrative costs, etc. – maybe it’s time we rethought what it looks like.  It’s too bad that, as we start to decide what constitutes essential benefits under ObamaCare, we’re still playing small ball.