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Proposed Changes to HSAs Could Unleash Demand for Direct Primary Care

December 14, 2016

Plans proposed by President-Elect Trump and Republicans in Congress could result in the success of a two-year effort to expand health savings account access for direct primary care members.

An 18-month, bipartisan effort in Congress to let patients with direct primary care (DPC) memberships use health savings accounts (HSAs) could be fulfilled early in 2017 by changes in federal health care policy promised by President-elect Donald Trump and other Republicans on the 2016 campaign trail.

Internal Revenue Service (IRS) rules prohibit individuals from contributing funds to a tax-deductible HSA account without purchasing a qualifying high-deductible health insurance plan. The IRS also forbids using HSA funds to pay monthly membership fees to DPC providers, who supply members with preselected preventive care services, tests, procedures, and medical discounts.

House Resolution 6015 and Senate Bill 1989, the Primary Care Enhancement Act, would let DPC members contribute to HSAs and draw from these accounts to pay their providers. The legislation would also clarify that DPC arrangements “shall not be subject to regulation as an insurance product or health maintenance organization by State insurance commissioners,” according to SB 1989.

Each bill has two Republican sponsors and one Democrat sponsor. Sen. Bill Cassidy (R-LA) introduced SB 1989 in August 2015, and Rep. Erik Paulson (R-MN) introduced HR 6015 in September 2016.

Deregulating HSAs is one of seven health care reform proposals released in March 2016 by Trump’s campaign. Trump has said he would convene a special session of Congress to repeal the Affordable Care Act upon taking office in January 2017.

Expanding HSA access and use is a key component of several Republican proposals to repeal and replace Obamacare, such as The World’s Greatest Health Care Plan Act of 2016, introduced by Cassidy and Rep. Pete Sessions (R-TX) in May 2016, and “A Better Way,” a proposal by House Speaker Paul Ryan’s (R-WI) Task Force on Health Care, published in June 2016.

HSA Reforms Likely Imminent

Dr. Phil Eskew, a doctor of osteopathy and general counsel of the Direct Primary Care Coalition, says Congress and Trump are likely to make HSAs compatible with DPC memberships. 

“With the Republicans controlling the House, Senate, and presidency, myself and others at the DPC Coalition anticipate a rapid correction to our health savings account disagreements with the IRS,” Eskew said. “Within the first few months of 2017, I expect that DPC memberships will partner nicely with HSA plans. Language from the Primary Care Enhancement Act, drafted with the help of the DPC Coalition, will likely be used to correct this problem.”

IRS limitations on HSAs suppress demand for DPC arrangements by depriving DPC members of equal tax treatment, Eskew says.

“The bills would increase patient and employer demands for DPC physicians by allowing DPC practices to have the same favorable tax status enjoyed by other clinics,” Eskew said. “Currently, when a patient purchases a DPC membership, according to the IRS, he is no longer able to contribute to an HSA and may not use the HSA to pay DPC fees.”

Could Increase Savings

In addition to spending less in taxes, patients free to use HSAs for DPC would spend less on health care and obtain better care, Eskew says.

“Direct primary care services benefit patients in two ways: lower health care costs and better quality care,” Eskew said. “The more a patient is currently spending on health care, the more dollars a DPC physician could potentially save the patient.”  

Dr. Garrison Bliss, board chairman of the Direct Primary Care Coalition, says the DPC model removes the mainstream, third-party-payer model’s incentives to run up their patients’ bills.

“There are no incentives in DPC to upsell patients on procedures, labs, imaging, office visits, and referrals the patients don’t need,” Bliss said. “There are also no conflicts of interest, because the providers work for the patients, not for their insurance company, government, or employer. Patients have very different needs from these entities.”

Giving individuals more control over HSAs is compatible with educating DPC patients to exercise more control over their health care.

“In DPC, we are much more focused on teaching patients how to maximize their own knowledge and manage more of their own chronic medical problems, using us as a reference and teacher rather than as an all-knowing authority and manager,” Garrison said.

Dustin Siggins (dustinsiggins@gmail.com) writes from Washington, DC.

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Dustin Siggins (dustinsiggins@gmail.com) writes from Washington, DC.