A new primary care payment model with health savings accounts

by Charles Smith, MD

Everybody seems to be dissatisfied with the current model of primary care.

Concierge and retainer practices are all the rage, but they serve too few patients. While some highly integrated systems (Mayo Clinic, maybe Kaiser Permanente) may be thriving, they are difficult to replicate. Most primary care physicians are demoralized by a system that overburdens them with administrative hassles and liability while providing insufficient revenue to improve workflow. Many providers also feel their incomes, which pale in comparison to specialists, aren’t commensurate with their level of stress and professional training.

Most patients aren’t happy either. Network plans dictate which physicians they can see. Adoption of modern technology has been slow. Visits (when you can get one) are squeezed into infinitesimal time slots. High deductibles deter timely care and the care you get is often fragmented and poorly coordinated.

The current fee-for-service model needs to be disrupted, but how do you replace it?

A new system will require better funding, but where do we find the money? Can we design a system which gives choice, access and price transparency to patients while establishing market pressures to drive quality and efficiency? Can we make primary care appealing to new generations of providers?

I’m not sure, but I’d like to share a model which might improve things. This plan does have a few caveats. First, I doubt it would save any money the first few years. It would however revitalize the primary care infrastructure which should be a key to efficient health care in the future. Second, it would divert resources utilized elsewhere in health care to primary care. More specifically, it would increase funding from its current rate of about 3% of total health care spending to about 7%. Western Europe funds at a higher rate.

OK, now for the plan.

The main feature is a primary care health savings account. The funding would come directly from your existing health plan and would have to be spent on primary care. For commercial plans, the rate could be 7% of the premium or a minimum of $300/year. HSAs have been around for years but were usually funded by the employee or employer instead of the health plan. It’s easy to set up and easy to fund. It would however, likely take an act of Congress to mandate it (literally). Medicare and other federal insurances could set similar rates and could adjust for severity of underlying illnesses. This would essentially create a pool of funding that is double what is currently spent on primary care.

Under this plan patients would have at least $300/year and an average of $500-$600/year to spend on primary care. Currently, a family practice doctor might receive on average $250/patient /year. Patients could spend this money (HSA debit card) on a fee for service basis or more likely on a quarterly or annual retainer where a flat fee covers their primary care needs. The benefit of the retainer model is that it creates incentives for providers to adopt efficiency measures like email, phone calls and web-based interactivity as there is no longer a concern about unreimbursed time.

In addition, pricing for services would be much more transparent, medical homes would have adequate funding and dissatisfied patients would have an easier time changing practices. Physicians would no longer have to process insurance claims and overheads would drop. They would also likely be more responsive to the needs of their patients.

This would not be a panacea, but would provide a foundation so that primary care can focus on those issues which are driving health care inflation like chronic disease management and unhealthy lifestyles. In addition, as genomic information and genetic testing become widely available, health care will become more personalized putting even more stress on the system. The above payment model would allow practices much greater flexibility to evolve to meet the demands of the future. Increased funding and flexible practice structures could yield entrepreneurial creativity previously unseen in primary care. Greater interest among students would be likely as lifestyle and income would approach that of subspecialists.

In conclusion, we need concrete plans to provide substantial rather than incremental funding increases for primary care. Further debate on how we allocate our health care resources is warranted.

Charles Smith is an internal medicine physician.

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  • http://cephalicfurrow.wordpress.com PeterW

    It’s not a bad idea from an economic standpoint, but the politics on this are going to be terrificly hard. It amounts to a straight subsidy to primary care practices, against the interests of not only other practitioners but also insurers as well. For all the positive connotations associated with “increased prevention” and “primary care” in the political discourse, I don’t see any such cap being passed anytime soon. (I also foresee plenty of gaming the system even if this was passed, with practices contorting themselves to meet the criteria for being considered a primary care practice, leaving legit practices with a small slice of the pie.)

    • CSmithMD

      “It amounts to a straight subsidy to primary care practices, against the interests of not only other practitioners but also insurers as well. ”

      Primary Care subsidizes every other area of medicine except vaccinations. Name 1 other Western nation that spends as low a percentage of health expenditures.

      “I also foresee plenty of gaming the system even if this was passed, with practices contorting themselves to meet the criteria for being considered a primary care practice”

      I wouldn’t have a problem with nonsurgical specialties providing primary care. Pulmonologists provide most primary care for COPD patients; Nephrologists are PCPs for most of their patients. I say the more the merrier. Let the patients decide where they want their care.

      “leaving legit practices with a small slice of the pie”
      I’ll take it.

  • http://onhealthtech.blogspot.com/ Margalit Gur-Arie

    How is the retainer model different from partial capitation for primary care services?

    • CSmithMD

      I would envision a Retainer Model as an all-inclusive quarterly or annual fee. Each practice could stipulate what it would cover and patients could choose among competing practices.Think less expensive Concierge medicine.The relationship is between the patient and physician with no 3rd party interference for payment.The practice insurance and billing overhead virtually disappears. E&M coding and hyperdocumentation disappear. Partial capitation is a good idea, but I prefer a more stream-lined model.

  • anonymous

    Has anyone here read “The Undercover Economist” by Tim Harford? He comes from a British perspective, but the plan he proposed in his chapter on health care has some similarities. He also suggested an HSA-like model, except he would give patients an incentive to stay healthy by allowing the HSA funds to roll over to the next year if not used in the present year, and bequeathed to family members if not consumed by a “do-everything” attempt at the end of life. Good reading for anyone interested in economics. Maybe if the policymakers started looking at these novel approaches and taking the best portions from each, they can really accomplish something…

  • ninguem

    HSA’s have a five-year track record. The data is there. The data supports HSA’s. They DO bend the cost curve. People DO use healthcare dollars more prudently, while still getting the preventive care done as much as those with more traditional coverage.

    Policy-makers on the state and national level, as well as physician “leaders”, continue to express agnosticism, which is really deliberate ignorance.

    The last thing the left wants is individual citizens in charge of their own healthcare dollars.

  • http://turnyourheadandcoughMD.blogspot.com Max Power

    I love the idea of HSAs. Not only to they bend the cost curve down, they incentivize patients to become smarter consumers by weighing the risks and benefits of their purchase.

    I am not really sold on is how this is better than a typical HSA in conjunction with a catastrophic coverage plan?

  • http://www.talktoyourunconscious.wordpress.com BobBapaso

    When is an HSA not and HSA? When it is not funded by its owner.

  • am

    I have the same question as Max Power, how is this plan different from an HSA with catastrophic coverage?

    Also – this would be perfect to use with a service like HelloHealth! (no affiliation to that company)

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