The ratio of doctors to health-care workers in America is one to 16. Of those 16 workers, only six are directly involved in patient care; the rest are administrative staffers. Yet doctors spend an increasing amount of time filling out paperwork and complying with government regulations that detract from the time they have to spend with patients. It’s no wonder that productivity in the American health-care system is poor, frustrating patients and doctors and driving up costs.

One solution may be direct primary care (DPC), a model in which medical practices don’t take insurance. Instead, patients pay a monthly membership fee in return for unlimited primary care, sometimes including discounted drugs, basic diagnostics, and enhanced physician access. Doctors devote more time to patient care and less to paperwork. By not chasing insurance reimbursement, DPC practices spend less on overhead and keep their costs down—membership fees average about $100 a month. At the same time, patients are encouraged to purchase catastrophic insurance or high-deductible health plans (HDHPs) to cover more serious illnesses. Physicians in DPC settings have no incentive to refer patients unnecessarily to expensive specialists but every incentive to manage chronic illnesses more effectively, potentially delivering better care at lower cost.

A recent report from Business Insider found that the average visit time in a DPC practice is 30–60 minutes, as opposed to 13–16 minutes at a standard family practice. This patient focus extends beyond the office, as DPC physicians tend to offer telemedicine—convenient access to a doctor through Skype or FaceTime—as part of membership. Think of it as a blend of high-touch with high-tech.

Direct-care practices can also work well when paired with high-deductible health plans, which are increasingly common. The average deductible for employer-based plans in 2016 was $1,478; 51 percent of all covered workers were enrolled in plans with a deductible of at least $1,000. The concern about HDHPs is that they can discourage patients from seeking routine care. One study found that about 30 percent of adults with an HDHP went without needed medical care because they could not afford it (compared with just under 20 percent of those with deductibles under $1,500).

The low monthly fee and enhanced services that DPC practices offer could bring much of this care into the reach of patients with HDHPs or those who couldn’t afford to buy traditional, comprehensive insurance plans, with high premiums. If direct-care plans could be funded out of health-savings accounts (HSAs,) they could become even more affordable, especially when paired with ultra-low-premium catastrophic coverage. Counting direct-care fees against the deductible would ensure that patients don’t face double jeopardy later if they need to access the insurance benefit for high-cost services, while still giving patients an incentive to seek out affordable-care options.

States and the federal government can both take steps to make direct care more attractive. States should free DPCs from being classified as “risk-bearing entities,” which means they get regulated and licensed as insurers; instead, states should require DPCs to maintain clear information about what services they offer within their monthly fee, and to ensure that patients understand that DPCs don’t cover specialist or hospital-based care.

The Internal Revenue Service should make it clear that DPC practices aren’t insurance, and are eligible for HSA payments, including through Medicare HSAs. The federal government has already demonstrated a willingness to classify DPCs as separate entities: the Affordable Care Act (known commonly as Obamacare), classifies DPCs as a primary-care service, not health insurance. Harmonizing Obamacare and IRS regulations would be a big step in the right direction.

With these fixes in place, patients will be able to pair direct care with lower-premium HDHPs, or catastrophic coverage, and use health-savings accounts to cover costs. With patients paying for routine services out of pocket, and physicians encouraged to bundle services together at competitive prices, direct-care options can bring more market forces to bear on health care.

Critics argue that if more doctors move to a direct-care model, seeing fewer patients, patients who can’t afford to pay the monthly fees will struggle to find providers. This argument ignores the potential for technology or practice redesign to drive greater efficiencies and productivity—through the use of nurse practitioners, for example, or telemedicine. Advanced nurse practitioners could also be allowed to open DPC practices, creating another affordable option. Blended practices could emerge, too, that provide enhanced services for an affordable fee, while still accepting most insurance—like One Medical. Others, like Iora Health, could carve out primary care for a flat fee from employers.

As the direct-care model grows, bumps in the road are inevitable. Qliance, one of the first major DPC practices, recently announced that it would be shutting down after ten years, citing “overwhelming financial difficulties.” Qliance’s collapse raises an important point: while small DPC practices are flourishing, implementing this model at a larger scale may be more challenging, given the need for large upfront investments to invest in infrastructure, like health IT. Larger markets require larger, more sustainable funding.

One potential solution is for DPC practices to contract with state governments to provide primary-care services for municipal employees. The Philadelphia-based R-Health recently began a pilot program along these lines, partnering with New Jersey to provide DPC services to the State Health Benefits Program (SHBP) and School Employees’ Health Benefits Program (SEHBP). R-Health aims to enroll 60,000 people in the first three years.

A similar proposal is under consideration in Michigan, which would include direct care in its Medicaid program. The pilot initiative aims to enroll 2,400 Medicaid recipients; the bill’s cosponsors estimate that, if expanded to the state’s 2.4 million Medicaid beneficiaries, the DPC model could reduce Medicaid costs by as much as 20 percent annually while increasing access to care (Medicaid programs typically pay less to doctors, and many physicians limit the number of Medicaid patients they see as a result). The question is simply whether DPC services can manage larger, more complex populations with diverse health-care needs. We’re about to find out.

If Republicans succeed in reforming Medicaid through per-capita caps, which give states a fixed amount of funding per enrollee in each Medicaid category (healthy adults, women and infants, disabled, and the elderly), direct-care practices—combined with other market reforms—could be a cost-effective strategy for states to provide additional basic health-care at an affordable price.

Overall, the future looks bright for DPCs: more than 600 direct-care practices are operating in 47 states and the District of Columbia. Laws classifying DPCs as non-risk-bearing entities have passed in 19 states, most recently in Colorado, which is home to 10 percent of the nation’s DPC practices.

Since January, bills have been introduced in the House and Senate that would clarify the Internal Revenue Code to allow individuals to pay direct-care fees with health-savings account dollars. And investors are taking notice: Iora Health, a Boston-based DPC practice that contracts with employers to provide direct primary-care benefits to their employees for a flat per-person fee, recently secured $75 million in venture funding.

Direct primary care isn’t a silver bullet for what bedevils American health care, but it is an important innovation that could help improve access, reduce unnecessary administrative costs, and encourage the use of more time- and labor-saving technology. Washington and the states should level the playing field and let patients and consumers decide for themselves if the model meets their needs.

Photo by Mario Villafuerte/Getty Images


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