Testimony of Charlie Katebi, Healthcare Policy Analyst, Wyoming Liberty Group
Before the Labor, Health, and Social Services Committee
August 24, 2015
Direct Primary Care-Insurance Exemption
Introduction:
My name is Charlie Katebi. I am a Policy Analyst at The Wyoming Liberty Group. I would like to express my thanks to the Joint Labor, Health and Social Services Committee for the opportunity to speak here this morning.
The Affordable Care Act was passed into law to address a very real problem. The problem is that health care costs have exploded over the last few decades. Unfortunately, the ACA has accelerated this trend.
And until a new President repeals the ACA, this law will remain a reality in our healthcare system.
If we want real healthcare reform that brings down the cost of care, we need to exploit the few pockets of our healthcare system that remain unregulated by the ACA, and allow innovation to take place within them.
For this, and other reasons, I urge you exempt Direct Primary Care from Wyoming’s Insurance regulations.
The Problem: Third Party Insurance
Why is healthcare so expensive?
It’s because health insurance does a terrible job of paying for value. Under our current system, Insurers pay providers on a fee for service basis. The more procedures that doctors provide, the more they’re paid. Doctors have every incentive to provide as many services as possible, regardless of their health benefits.
And to be clear, excessive care doesn’t actually make us healthier. An institute of Medicine report found that roughly one-third of all healthcare services we use is completely unnecessary and does nothing to improve our quality of life.
This excessive care hasn’t come cheap either. According to Ehealthinsurence.com, the average insurance premium now costs $448 per month in Wyoming. And in 2016, insurers have requested raising premiums 38%, on average.
Third Parties Raise Costs on Providers
Insurance is also becoming unaffordable for healthcare providers. The average private practice spends at least a quarter of their budget on simply interacting with insurance companies. This involves billing, negotiating reimbursements, as well as complying with federal and state insurance regulations.
It’s no wonder we’re seeing more physicians selling their practices, and opting instead to work for hospitals. A survey conducted by the consulting firm, Accenture, highlighted an alarming trend. The number of physicians working independently dropped from 57 percent in 2000 to just 39 percent in 2012. When asked why, the vast majority cited the growing cost of running their practices.
If these trends continue, Wyoming’s patients will have even fewer choices when it comes to their healthcare provider.
Direct Primary Care Benefits Patients:
What if patients could access essential medical care at an affordable price and physicians could treat them without being burdened by onerous overhead costs?
With Direct Primary Care we can achieve both goals.
It aligns the interests of patients with their doctors. When patients pay a single fee for their care, it is in their doctor’s interest to keep them as healthy as possible, as cost effectively as possible. If your doctor provides too much care, those unnecessary services won’t be reimbursed. On the other hand, if your doctor provides too little care, and your health worsens, he will have to provide more expensive care in the future, and those costs will have to be paid out of his pocket.
This type of care is relatively new, but it’s already showing it can deliver both positive health outcomes as well as savings for patients.
The Seattle based hospital group, Qliance, compared patients with traditional insurance against those with Direct Primary Care. They found that direct care patients had 43 percent shorter hospital stays, 65 percent fewer ER visits, and needed 82 percent fewer surgeries. By the way, Qliance’s average fee is just $65 per month.
Direct Primary Care Benefits Doctors:
Direct Primary Care offers additional benefits for Wyoming’s healthcare system in particular. This state has a significant doctor shortage because exorbitant administrative costs have discouraged many physicians from starting private practices here.
Direct Primary Care would allow Wyoming’s doctors to treat their patients without spending enormous sums dealing with insurers. This will lower a major barrier to entry for many doctors wishing to practice, and encourage more doctors to open practices here.
After seeing these results, more physicians than ever want to contract directly with patients. Seven percent of physicians already offer Direct Primary Care. And 13 percent of physicians want to provide this type of care in the future, according to a survey by the Physician Foundation.
Regulatory Risks
But despite Direct Primary Care’s benefits, state insurance regulations threaten this business model. For a direct care provider to remain viable, a patient’s monthly fees must be enough to cover the costs of their care.
For example, Qliance requires older patients that have more expensive healthcare needs to pay $20 more in monthly fees
than younger patients.
However, many state insurance boards, including Wyoming’s, consider this to be the behavior of a “risk bearing entity” and subject to their authority. This would force Direct Primary Care providers to comply with all the rules and regulations that have made health insurance so expensive.
In order to encourage this innovative new way of delivering care, 13 states have passed legislation exempting Direct Primary care from insurance regulations. These states understand the value of Direct Primary Care and are taking action to protect it.
Conclusion
If we want to make healthcare affordable and empower patients with greater choices, we need to allow them to access essential medical care outside of our broken health insurance system.
For these reasons, I urge you to exempt Direct Primary Care from Wyoming’s insurance regulations.
Thank you for your attention.
Charlie Katebi
charles.katebi@wyliberty.org