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States Should Protect Direct-Pay Health Care Models

January 26, 2017

Consumer Power Report #532

Lawmakers in several states are preparing to take up legislation protecting private, direct-pay agreements between doctors and patients from market-crushing regulations. They should trust their instincts, passing such protections immediately instead of waiting for cues from Washington, DC, regarding the future of Obamacare.

Even under the obtrusive Affordable Care Act (ACA), direct-pay health care arrangements offer significant benefits to patients and doctors. Those benefits would multiply exponentially by getting ACA out of the way. No one should be forced into direct-pay health care arrangements, and no one wants to force them, but lawmakers should at least do all they can to ensure patients and providers have the option.

Currently, the reverse is often the case, because providers are hesitant to adopt a business model bureaucrats could suddenly quash. Lawmakers in 37 states have yet to protect “direct primary care” (DPC) practices from onerous insurance regulations that would put DPC providers out of business.

States should pass legislation specifying DPC arrangements are not insurance and are therefore exempt from insurance regulations, including the requirement insurers maintain huge financial reserves small practices cannot. Such legislation would create an inviting regulatory environment for physicians considering opening up DPC practices.

Patients pay DPC physicians directly, reducing physicians’ overhead. Pure DPC providers invest literally no time fussing with insurance paperwork or haggling with insurance companies. Nor do DPC providers have to chase down payments from patients, whose monthly membership fee gives practices a predictable income stream.

In exchange for a modest monthly fee ranging from $25 to $125 and averaging $80, DPC providers offer patients a range of preventive care services, tests, labs, and a fixed number of doctor visits. These services account for 70 to 80 percent of all health care services, which for many patients could mean 100 percent of the services they use in most years. For non-primary care services, DPC providers negotiate impressive direct-pay discounts with specialists, in some cases up to 98 percent off.

DPC providers stress that membership is not a form of insurance, and many encourage patients to obtain some form of “catastrophic coverage,” an insurance plan with very low premiums and a high deductible. A patient would seldom use it-indeed, he would hope never to use it.

Many people mistake the bronze-level plans sold on Obamacare exchanges for catastrophic coverage because bronze deductibles are so high-too high for people using insurance to pay for routine care. True catastrophic coverage, however, has lower premiums and higher deductibles, because patients would use it to pay for health care as seldom as they use their auto and homeowners insurance policies to pay for car and home repairs.

Some lawmakers question whether DPC memberships are worth it for patients, considering memberships do not satisfy ACA’s individual insurance mandate. These lawmakers should consider two things.

First, if the ACA debacle has taught us anything, it is that lawmakers should let patients choose for themselves which health care arrangements offer the best value. When government appoints itself the market’s judge, it becomes the market’s executioner as well. If patients choose to obtain health care with a $600 to $1,000 annual DPC membership, plus the low premiums of non-ACA-compliant catastrophic insurance, plus a $695 Obamacare penalty, such an arrangement must offer extraordinary value.

Second, DPC membership already offers many patients sufficient value despite Obamacare’s market obstruction. Patients could treat their bronze plans as catastrophic coverage (even though true catastrophic coverage would have lower premiums and a higher deductible). They would pay their bronze premiums, plus pay $600 to $1,000 for a DPC membership, plus budget a few hundred dollars more just in case they need to direct-pay a specialist from whom their DPC provider would negotiate a massive discount.

Voila. These patients would not pay a dime more for health care in a year, and they probably would enjoy unlimited doctor visits and telemedicine included in their DPC memberships-more health care in a year than most insured people receive. They would enjoy hugely discounted cash prices in exchange for not using insurance to pay for routine care. Assuming no catastrophe strikes, patients could easily pay far less for health care as a DPC member than they would pay chasing a $6,000 bronze plan deductible.

The DPC model is a prime example of an innovative, patient-centered health care reform driven by markets instead of governments. The incentives DPC offers patients may pale in comparison to the incentives DPC will offer them once ACA is repealed, but they do exist, as evidenced by the boom in DPC practices many states are seeing. Lawmakers should remove regulatory barriers to entry deterring physicians from opening DPC practices.

– Michael T. Hamilton (mhamilton@heartland.org), @MikeFreeMarket) is a Heartland Institute research fellow and managing editor of Health Care News, author of the weekly Consumer Power Report, and host of the Health Care News Podcast.


IN THIS ISSUE:


JUDGE NAPOLITANO: TRUMP’S OBAMACARE EXECUTIVE ORDER THE MOST REVOLUTIONARY ACT I’VE SEEN IN 45 YEARS

Within four hours of becoming president of the United States, Donald Trump signed an executive order intended to limit immediately the effects of the Patient Protection and Affordable Care Act (ObamaCare) in ways that are revolutionary.

With the stroke of a pen, the president assaulted the heart of the law that was the domestic centerpiece of his predecessor’s administration. How did this happen? How can a U.S. president, who took an oath to enforce the laws faithfully, gut one of them merely because he disagrees with it?

Here is the back story.

When ObamaCare went through Congress in 2010, all Democrats in Congress supported it and all congressional Republicans were opposed. The crux of their disagreement was the law’s command that everyone in the United States obtain and maintain health insurance - a command that has come to be known as “the individual mandate.”

Republicans argued that Congress was without the authority to compel people to enter the marketplace by purchasing a product - that such decisions should be freely made by individuals and that that freedom was protected from governmental interference by the Constitution.

Democrats argued that the commerce clause of the Constitution, which permits Congress to regulate commerce among the states, also permits it to compel commercial activity on the part of individuals who make up a highly regulated component of interstate commerce.

To ensure compliance with the individual mandate, the law provided that the IRS would collect the fair market value of a bare-bones insurance policy from those who did not obtain and maintain one. The government would then take that money and purchase a health insurance policy for that individual who rejected the law’s command.

Though Congress did not call it a tax and the government’s lawyers uniformly and consistently denied in all courts where it was challenged that it was a tax and President Barack Obama rejected the idea that it was a tax and even the lawyers for the challengers denied it was a tax, a 5-4 majority in the Supreme Court characterized the money collected by the IRS from noncompliant individuals as a tax.

This is profoundly significant for constitutional purposes because though Congress cannot regulate anything it wants, Congress can tax anything it wants, as long as the tax falls equally on those in the class of people who are paying it. This unheard-of characterization of a non-tax as a tax was necessary to salvage ObamaCare before the high court because a different 5-4 majority in the same case ruled that the Republican congressional argument was essentially correct - that the commerce clause does not empower Congress to compel commercial activity.

All of this has been debated loud and long since the law was enacted in 2010, validated by the Supreme Court in 2012 and came into Trump’s crosshairs in the Republican presidential primaries and again in the general election campaign.

Trump argued that the government cannot compel commercial activity, even as part of a large regulatory scheme, because the Constitution protects everyone’s right to purchase a lawful good or not to purchase one. He also asserted that ObamaCare does not make economic sense because its regulation of the practice of medicine and its administration of health insurance have resulted in a diminution of choices for consumers, which in turn has raised premiums, as well as deductibles, and chased primary care physicians from the marketplace. The Obama mantra that you could keep your doctor and your health insurance under ObamaCare proved to be patently false, Trump argued.

When Trump promised that as president - on “day one” - he would begin to dismantle ObamaCare, some Republicans, many members of the press and most Democrats laughed at him. They are laughing no longer because the first executive order he signed on Jan. 20 directed those in the federal government who enforce ObamaCare to do so expecting that it will soon not exist.

He ordered that regulations already in place be enforced with a softer, more beneficent tone, and he ordered that no penalty, fine, setoff or tax be imposed by the IRS on any person or entity who is not complying with the individual mandate, because by the time taxes are due on April 15, the IRS will be without authority to impose or collect the non-tax tax, as the individual mandate will no longer exist. Why take money from people that will soon be returned?

Then he ordered a truly revolutionary act, the likes of which I have never seen in the 45 years I have studied and monitored the government’s laws and its administration of them. He ordered that when bureaucrats who are administering and enforcing the law have discretion with respect to the time, place, manner and severity of its enforcement, they should exercise that discretion in favor of individuals and against the government. …

SOURCE: Judge Andrew Napolitano, Fox News


HOW VIRGINIA’S CERTIFICATE-OF-NEED (CON) HOSPITAL LICENSING LAWS LED TO AN INFANT’S DEATH

Dr. John Harding was on call when the patient arrived. Twenty-four weeks pregnant, she was bleeding and in pain, suffering from a condition known as a placental abruption, where the placenta detaches from the inner walls of the uterus and triggers premature labor. It can be deadly for both mother and child.

As his colleague in the obstetrics unit at LewisGale Medical Center in Salem, Virginia, tended to the patent, Harding rushed to the phone. At Carilion Medical Center, six miles away near downtown Roanoke, there was a special treatment center for premature and ill infants. The other hospital had a special ambulance equipped with bassinets-incubators equipped with a suite of advanced medical tech for monitoring and treating newborns. Harding knew the mother and baby needed that ambulance as quickly as possible.

“We’ve got a chance,” he later recalled thinking.

But the special ambulance was not available. It was on another call, miles away on the opposite side of the service area, he was told. There was no way to get the critically ill newborn to the neonatal intensive care unit at Carilion.

“I had to go back in there and tell her, you know, it’s not coming,” Harding said, describing the incident a month later during a public hearing with officials from the state Department of Health.

With no emergency transportation available, Harding and his colleague Kevin Walsh called for whatever assistance they could muster. A pediatrician and anesthesiologist joined the two doctors and their nurses in the delivery room.

They saved the mother’s life.

The baby didn’t make it.

That infant, who died in February 2012, died not only because of medical complications but because the hospital where it had the misfortune to be born did not have the equipment necessary to give it a better chance at survival. The institution was not equipped to handle the difficult birth because the government of Virginia had refused to let it have high-tech neonatal care facilities, declaring that they were not necessary.

This baby died, at least in part, because bureaucrats in Richmond-acting in accordance with the wishes of LewisGale’s chief competitor and against the wishes of doctors, hospital administrators, public officials, and the people of Salem, Virginia-let it happen.

Like many states, Virginia has a Certificate of Public Need (COPN) law requiring hospitals and other medical providers to get special permission from the state government before they are allowed to offer new services, like the specialty nursery that may have saved that child’s life in 2012. These COPN licensing processes are supposed to balance the interests of hospitals with the needs of the public, but in reality they are fraught with politics and allow special interests to effectively veto unwanted competition.

In July 2010, two years before the baby died, administrators from LewisGale Medical Center submitted an application to the state Department of Health seeking permission to build a small specialty care nursery service. It was denied. The state’s refusal ensured that, sooner or later, some child would face an ugly fate. …

SOURCE: Eric Boehm, Reason


SEN. RON JOHNSON (R-WI) REINTRODUCES NATIONAL RIGHT-TO-TRY LEGISLATION IN NEW CONGRESS

U.S. Sen. Ron Johnson reintroduced “right-to-try” legislation Tuesday in a bid to allow terminally ill patients to receive experimental drugs not approved by the U.S. Food and Drug Administration.

The Republican from Oshkosh chairs the Senate Homeland Security & Governmental Affairs Committee. He sought to move similar legislation last year but his effort was blocked by then-Senate Minority Leader Harry Reid of Nevada.

Johnson has named his bill after Trickett Wendler of Pewaukee, who in 2015 died from amyotrophic lateral sclerosis (ALS). The measure is a federal counterpart to legislation that has passed in 33 states. Johnson’s legislation, with 43 co-sponsors, would prohibit the federal government from taking action to prevent patient access to experimental medications when several conditions are met.

Supporters say right-to-try legislation enables those with terminal illnesses to access experimental drugs and new treatments early in the development pipeline. Eligible medications have to pass phase one of clinical trials.

Critics say the legislation offers false hope, because the laws don’t require a company to grant a patient’s request. They say patients can gain access to experimental drugs through the FDA’s policy of expanded access.

SOURCE: Bill Glauber, Milwaukee Journal Sentinel


NORTH DAKOTA LAWMAKERS SINK TEETH INTO DENTAL THERAPY, KANSAS CONSIDERS

The powerful and well-entrenched dental lobby that has thwarted efforts to add dental therapy to the oral health care mix may have finally met its match in North Dakota.

Dental therapists are mid-level providers who work under the supervision of dentists and are licensed to perform many of the same procedures, such as fillings and tooth extractions. They are authorized to practice in Minnesota, Maine and Vermont, as well as on tribal lands in Oregon, Washington and Alaska. …

In North Dakota, whose legislature meets every other year, legislators are reviving a 2015 effort to introduce dental therapists to reach those who live in underserved and rural areas.

Two years ago, the state Senate soundly defeated a dental therapy bill by a 40-6 vote. The measure drew strong resistance from the American Dental Association and its state counterpart, the North Dakota Dental Association, as well as Dr. Brad Bekkedahl, who also is a state senator. …

Bekkedahl repeated the same beef at a Jan. 18 hearing on the current dental therapy bill held by the house Human Services Committee. “My research and knowledge of this dental therapist licensing model has me asking myself the same question relative to the quality-of-care issues: Is it best for the patient? Unequivocally at this time, I must answer the question ‘no,’” he was quoted as saying.

Michael Hamilton, senior research fellow in health care policy at the free-market think tank the Heartland Institute, says that objection doesn’t work anymore, and he told the same committee so. Hamilton is co-author of a new policy brief “The case for licensing dental therapists in North Dakota,” published by Heartland and the Texas Public Policy Foundation.

Hamilton says the paper’s findings are persuading people who live in the 35 federal dental health professional shortage areas. He points out that North Dakota, at 72 percent, had the third-worst rate in the nation in 2015 of children on Medicaid who did not use preventive dental care for which they were eligible. That despite dentists in the state enjoying some of the highest Medicaid reimbursement rates in the country.

While addressing the Human Services Committee, Hamilton took the opposition’s standard arguments and refuted them one by one, effectively yanking the rug from underneath dental groups’ favorite talking points.

“The biggest objections I hear are quality - you’re going to have a two-tiered system, they’re going to be distributed in the wrong places in the state, you’re going to shortchange yourself out of other options, dentists don’t want dental therapists, and then one about socialism that socialist countries have these,” he said.

“The two main reasons [those arguments] crumble are because no dentist would have to hire a dental therapist if he or she does not want to, and dental therapists would practice exclusively under the supervision of a licensed dentist who would choose to employ them.” …

Meanwhile, a similar bill has been introduced in Kansas. A coalition called the Kansas Dental Project touts the dental therapy bill as job creation and a solution to the dental workforce shortage in 87 of the state’s 105 counties.

SOURCE: Kathy Hoekstra, Watchdog

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Author
Michael Hamilton writes and edits for the liberty-minded clients of Good Comma Editing, LLC, a freelance writing and editing company.
media@heartland.org @MikeFreeMarket