AAFP Applauds Bill to Ease Direct Primary Care Payment

Legislation Would Allow Use of HSAs for Monthly Fees

January 24, 2017 02:21 pm News Staff

Some family physicians might be intrigued by the idea of direct primary care (DPC) but hesitate to adopt this emerging model because of regulatory limitations.

Federal lawmakers who are aware of the growing interest in DPC have again this month introduced legislation that aims to make it easier for physicians and patients to choose this model. Two legislators, Reps. Erik Paulsen, R-Minn., and Earl Blumenauer, D-Ore., recently introduced the Primary Care Enhancement Act of 2017,(www.congress.gov) which would change tax laws that are hindering the growth of DPC.

Existing tax law treats DPC as health insurance, prohibiting patients from paying monthly fees using their health savings accounts (HSAs) without incurring a tax penalty. In addition, DPC practices can see Medicare beneficiaries as long as the practice's retainer fee does not cover services already covered under Medicare. Those that do so are advised to contact a health care attorney familiar with retainer-based practice models to ensure there is no conflict with Medicare's regulation of concierge care delivery.

The new bill would change the legal definition of DPC to clarify that the model is not health insurance.

AAFP Board Chair Wanda Filer, M.D., of York, Pa., signed a Jan. 13 letter(1 page PDF) supporting the legislators' stance on removing the tax restrictions on DPC.

"The ranks of family physicians practicing in DPC is growing among AAFP's membership and attracting more young physicians to the specialty of family medicine," the AAFP letter stated.

Three percent of AAFP members practice in a DPC setting. They typically have a lower patient volume but also incur lower expenses for administrative staff, and they report having more time to spend with patients.

DPC patients pay a monthly, quarterly or annual fee to their chosen physician's office, which covers most primary care services. They are encouraged to obtain a high-deductible health insurance plan to cover services that are not included in the DPC arrangement.

"Under existing interpretation of the Internal Revenue Code, patients with HSAs are prohibited from engaging in DPC arrangements with a family physician or other primary care physician," the letter stated. "Your bill removes this barrier by allowing patients with HSAs to freely contract with physicians for DPC services."

Despite the current restrictions, some employers have opted to offer DPC benefits as an alternative to expensive commercial health insurance. It is particularly popular in the service sector -- notably, among large restaurants and hotels.

Physicians who want to understand DPC in greater depth may be interested in a workshop the AAFP is offering in Atlanta on March 11.

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