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Forbes | By Sally Pipes | Contributor | APRIL 1, 2013 | Obamacare’s most intrusive changes to the healthcare marketplace — including the individual mandate whereby Americans must secure health insurance or pay a fine and its massive expansion of Medicaid — are less than a year from taking effect.
Many doctors have decided that they’re not interested in seeing how those changes play out in their own practices. Nearly two-thirds of doctors say that they or their colleagues will retire earlier than planned over the next few years, according to a survey conducted by consulting firm Deloitte.
Others are considering a departure from the current system of third-party payment. Instead, they’re exploring direct payment, with patients paying for care on their own.
Patients should welcome this development. Not only does the move toward direct payment have the potential to reduce health costs — it could also yield higher-quality care.
Even before Obamacare, direct-pay practices were growing in popularity. According to the Center for Studying Health System Change, direct-payment practices increased from 9.2 percent of the market in 2001 to 12.4 percent by 2008.
Nearly 7 percent of doctors say they are planning to change to some form of direct-pay care in the next three years, according to a survey of 13,000 doctors done for the Physicians Foundation. The consulting firm Accenture projects that one in three doctors in independent practice will adopt “subscription-based care models.”
One direct payment model that’s growing in popularity is “concierge” care, whereby doctors charge a monthly or annual fee for care — and bypass the administrative headaches associated with insurance and government programs altogether. The American Academy of Private Physicians — which represents cash-only doctors — estimates that the number of concierge doctors has shot up 30 percent in just the last year.
Examples of these practices abound.
Qliance, for instance, offers primary and preventive care for less than $90 a month in several cities in Washington state. In January, the company raised $8.6 million to expand beyond its home state.
One Medical in San Francisco charges patients between $150 and $200 a year for same-day appointments, online prescriptions, and email access to doctors. And in Portland, Oregon, patients at the Multnomah Family Care Center can pay a one-time enrollment fee and then monthly membership and provider fees that average less than $60 a month for preventative care. Others include Atlas MD, MedLion, Simple Care, and Paladina Health.
The direct-pay model does force patients to shoulder more of the upfront cost of their care. But the long-term savings it can generate are substantial. Qliance, for example, says it can trim as much as 30 percent off health costs by combining its services with a high-deductible plan for major medical bills.
High-deductible plans are usually paired with health savings accounts (HSAs), which allow consumers to set aside money tax-free for health expenses. HSAs empower patients to take charge of their care — and can make visits to direct-payment practices even more affordable.
At Access Healthcare, a cash-only practice, fees can be lower than the co-pays a patient would otherwise cover under a traditional insurance plan. The cost-lowering potential of direct-payment practices is heartening because the current third-party payment system has failed to stem our burgeoning health cost crisis.
Indeed, third-party payment is largely to blame for the untamed growth of health costs. Back in 1960, only about half the nation’s health spending was paid for by a third party, according to the Centers for Medicare and Medicaid Services. By 1980 that had risen to 77 percent. Today, it’s 88 percent. Not surprisingly, as consumers’ out-of-pocket share of health costs has declined, their demand for care has exploded.
Our tax regime encourages such over-consumption. Employer-sponsored insurance benefits are not taxed. So a worker receives a full dollar’s worth of health benefits for every dollar his employer pays for insurance — compared to less than 85 cents for every dollar his boss spends on wages. As a result, health costs have grown at double the rate of inflation elsewhere in the economy.
That’s not sustainable. Direct-payment could check that cost growth, particularly in the primary care realm, by empowering doctors and patients to negotiate mutually agreeable prices, free of interference from insurers or the government.
Reason magazine recently profiled Dr. Ryan Neuhofel, a Kansas doctor who posts his prices online and doesn’t accept insurance. A 30-minute house call runs $100. That may seem high to those used to $30 co-pays. But that $100 house call may end up being cheaper, after taking into account sky-high monthly insurance premiums, steadily rising annual deductibles, and out-of-pocket maximums — not to mention the time and expense that both doctors and patients have to devote to filing claims.
Obamacare will only add to the cost-inflating administrative burden that third-party payment places on doctors. Direct-payment allows physicians to reject that burden and focus on what they do best — treating patients.