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Research & Commentary: Michigan Direct Primary Care Pilot Could Save Medicaid Millions

May 31, 2016

A new pilot proposal currently being considered in Michigan would integrate a direct primary care (DPC) program into the state’s expensive Medicaid system to help reduce costs and improve care.

stethoscope and insurance docs

A new pilot proposal currently being considered in Michigan would integrate a direct primary care (DPC) program into the state’s expensive Medicaid system to help reduce costs and improve care. Under the pilot project, 2,400 Medicaid recipients would be enrolled in the state’s Direct Primary Care Services (DPCS).

Under a direct primary care program, patients pay a monthly membership fee, typically ranging from around $50 to $80. As part of the membership, patients receive a more generous allocation of appointments than they would under most traditional health insurance plans, even allowing in some instances for same-day appointments or house calls.

The guarantee of a set monthly fee removes the layers of regulation and bureaucracy created by the traditional insurance system and allows physicians to see fewer patients and focus more on each patient. Routine tests and procedures are included in most DPC plans, and lower membership fees are often charged for programs that do not provide these additional services. Individuals enrolled in a DPC program often supplement their DPC coverage with a wraparound catastrophic insurance policy for all services not specific to primary care.

Medicaid spending has become a substantial problem in Michigan; it has become the single largest item in the state budget, currently at $17.5 billion. According to the pilot bill’s sponsors, the success of the pilot would be determined based on a reduction in the number and severity of non-primary-care claims. The hope is to eventually expand DPCS to all 2.4 million Medicaid enrollees, which could generate a potential savings to the state of $3.4 billion. One in four Michiganders are currently enrolled in Medicaid. 

DPC plans address many issues currently plaguing health care providers. DPCs eliminate burdensome insurance approvals and paperwork, which typically requires a large staff to navigate. Federal requirements lock doctors into certain treatments in order to receive reimbursement, but DPC’s allow doctors to have more freedom to treat each of their patients based on their concerns and observations. According to the Docs4Patient Care Foundation, under a DPC model medical practice overhead can be reduced by as much as 40 percent.

One of the lesser-known factors contributing to the rapid increase in the cost of health care is the shrinking number of primary care physicians (PCPs) available relative to the size of the population. The Robert Graham Center has estimated to maintain current rates of primary care utilization, Virginia will need “an additional 1,622 primary care physicians by 2030, a 29% increase compared to the state’s current (as of 2010) 5,471 PCP workforce.”

Opponents of DPCs argue they give a false sense of security when purchased as standalone health coverage. Proponents of DPC programs agree these services are best used in conjunction with a high-deductible health care insurance plan or another form of catastrophic coverage to handle in-patient health care services. The American Academy of Family Physicians has endorsed the DPC model.

Direct primary care empowers patients and doctors, giving them more freedom to establish and participate in health-care-provider models that work best for all patients. The Michigan pilot program could serve as a model for other states to follow, saving billions in Medicaid spending while providing better care for patients.

The following documents examine Michigan’s pilot program and direct primary care in greater detail.
 

Beacon Explains: Direct Primary Care
https://www.beacontn.org/beacon-explains-direct-primary-care/
Justin Owen of the Beacon Center of Tennessee examines direct primary care and how it could break down the current inefficient third-party payment system, which, according to much research, dramatically increases the cost of providing health care services.

Direct Primary Care: An Innovative Alternative to Conventional Health Insurance
https://www.heartland.org/policy-documents/direct-primary-care-innovative-alternative-conventional-health-insurance
Insurance-based primary care has grown increasingly complex, inefficient, and restrictive, driving frustrated physicians and patients to seek alternatives. Direct primary care is a rapidly growing form of health care which alleviates such frustrations and offers increased access and improved care at an affordable cost. State and federal policymakers can improve access to direct primary care by removing prohibitive laws and enacting laws encouraging this innovative model to flourish. As restrictions are lifted and awareness expands, direct primary care will likely continue to proliferate as a valuable and viable component of the health care system.

Where Obamacare Leaves Questions, Direct Primary Care May Offer Answers
https://www.heartland.org/policy-documents/where-obamacare-leaves-questions-direct-primary-care-may-offer-answers
Proponents of the Affordable Care Act (ACA) set out to remake American health care with the law’s passage in 2010, but in many respects the ACA didn’t change the health care paradigm at all; it simply doubled-down on a broken, decades-old status quo making health “coverage” a national priority, rather than focusing on limiting health care costs and enhancing health care access. Patrick Ishmael of the Show-Me Institute explores in this essay a promising medical practice model, direct primary care, which he says could deliver on the promises made by proponents of the ACA to lower costs and improve access to quality health care.

Direct Primary Care: Practice Distribution and Cost Across the Nation
https://www.heartland.org/policy-documents/direct-primary-care-practice-distribution-and-cost-across-nation
Philip M. Eskew and Kathleen Klink describe the direct primary care (DPC) model; identify DPC practices across the United States; distinguish it from other practice arrangements, such as the “concierge” practice; and evaluate data compiled from existing DPC practices across the United States to determine the cost advantages associated with this model. Eskew and Klink confirmed DPC practices’ lower price points and broad distribution, but data about quality are lacking.

Direct Primary Care: A Legal and Regulatory Review of an Emerging Practice Model
https://www.heartland.org/policy-documents/direct-primary-care-legal-and-regulatory-review-emerging-practice-model
Philip M. Eskew examines concerns related to the “business of insurance” (BOI) encountered by DPC physicians. He analyzes recommended contractual provisions used to minimize BOI risk; compares state laws written chiefly to address risks related to BOI; considers the DPC provisions in the Affordable Care Act; and briefly considers the tax and scope-of-practice policy implications of the DPC model.

Ten Principles of Health Care Policy
http://heartland.org/policy-documents/ten-principles-health-care-policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems. 

Direct Primary Care: Restoring The Doctor-Patient Relationship
http://www.forbes.com/sites/katherinerestrepo/2015/10/23/direct-primary-care-restoring-the-doctor-patient-relationship/
Katherine Restrepo writes about direct primary care and how it could lower costs and improve the relationship between doctors and patients in this article in Forbes. “The beauty of practices like Doctor Direct is the traditional doctor-patient relationship is restored. By cutting 40 percent of overhead which is normally spent on getting paid by insurance companies, primary care providers can devote hour-long appointments to their patients and deliver care at a fraction of the cost.”

The Obamacare Evaluation Project: Access to Care and the Physician Shortage
http://heartland.org/policy-documents/obamacare-evaluation-project-access-care-and-physician-shortage
Paul Howard and Yevgeniy Feyman of the Manhattan Institute find population growth, demographic changes, and an expansion of insurance spurred by Obamacare will contribute to a significant shortage in primary care physicians over the coming decade.

Obamacare’s Impact on Doctors—An Update
http://www.heritage.org/research/reports/2013/08/obamacares-impact-on-doctors-an-updat
In this Heritage Foundation Issue Brief, Alyene Senger outlines several effects of Obamacare on doctors: “Specifically, physicians will be subject to more government regulation and oversight, and will be increasingly dependent on unreliable government reimbursement for medical services. Doctors, already under tremendous pressure, will only see their jobs become more difficult.” 

Studies Show: Medicaid Patients Have Worse Access and Outcomes than the Privately Insured
http://heartland.org/policy-documents/studies-show-medicaid-patients-have-worse-access-and-outcomes-privately-insured
In this Heritage Foundation Backgrounder, Kevin Dayaratna states it is becoming increasingly difficult for Medicaid patients to find access to primary and specialty care physicians. As a result, when Medicaid patients are admitted to hospitals, they often arrive with more serious conditions than those with private insurance. By expanding this broken program, Obamacare will only exacerbate the problem. Policymakers should reform Medicaid to allow recipients access to private insurance in a consumer-driven market, Dayaratna writes. 

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at http://news.heartland.org/health, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database, at www.policybot.org. 

If you have any questions about this issue or The Heartland Institute’s website, contact Nathan Makla, The Heartland Institute’s government relations manager, at nmakla@heartland.org or 312/377-4000.

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Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR