Hopeful Medicaid 'Direct Primary Care' Pilot Embraced by Senate, Gutted by House

Special interests prefer status quo

Rising costs in Medicaid, Michigan's medical welfare program, are putting a strain on the state budget and crowding out funding for other priorities. When the state decided to allow more people to sign up for Medicaid — encouraged by President Obama's health care law — some officials said the move would save money. But more people signed up than expected, and the projected savings never came to be. Now, one state senator thinks the solution is to cut out the middleman and return to a simpler approach.

The approach is "direct primary care," and the latest version of the state Senate's budget plan for next year calls for bringing it to Medicaid on a trial basis. Direct primary care is already gaining a foothold in the private market for health care. In that approach, a doctor and patient sign an agreement with each other. For a monthly fee, the doctor provides a certain number of visits, including annual checkups, and access to a number of other services that can be done in the office.

Prices for routine diagnostic procedures, blood tests, and other services are often a fraction of the usual cost. Patients have access to the doctor via text, email, or telephone as well as office visits, enjoying a level of service that has disappeared in most areas of medicine today. The monthly fee varies from doctor to doctor, but one Brighton-based practice charges individuals $50 per month and families $135 per month.

Since direct primary care does not involve the use of insurance companies and other third-party payers, it can reduce administrative costs: The customer pays the doctor directly. Patients will typically also have a high deductible health insurance plan to cover unforeseen and catastrophic medical expenses.

Sen. Patrick Colbeck, R-Canton, said the pilot program involves 2,400 people and would be for just three years. The individuals would be in Wayne, Oakland and Macomb counties. The pilot, if successful, could be expanded statewide.

“This is one of those rare opportunities where we can improve services and save money,” Colbeck said. “This is a pilot. It has to be proven before we expand it further.”

The Michigan House appears less than enthusiastic about the pilot. While the Senate version says the Michigan Health and Human Services “shall” implement the pilot program with specific features and provisions, the House budget only requires officials in the department to “consider” implementing something called direct primary care, and it does not lay out any details.

Dave Waymire, a spokesman for the Michigan Association of Health Plans, supported the House plan.

"We support the House version, but are meeting directly with Sen. Colbeck and physicians to continue discussions,” Waymire said in an email.

Currently, almost all people receiving benefits from Michigan Medicaid are enrolled in what amounts to an HMO-type plan with a particular hospital, subject to conditions and limits negotiated between the state and that hospital. The same incentives for hospitals to skimp on care that led to a backlash against private Health Maintenance Organizations in the 1980s and 1990s exist and Medicaid patients have no say in any of it. The best research on the subject also suggests that health outcomes from that arrangement are mediocre at best.

Under the Senate budget bill, the physician would also act as a gatekeeper for access to treatments that only a hospital can provide, for which the hospital would be reimbursed by the state under the same kind of HMO-like contracts that exist now. While that part of health care would not change under the Senate plan, people receiving Medicaid benefits would get a real relationship with a real doctor — something they don't have now — and still have access to the big hospital for serious or complicated treatments.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.