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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