What Free Market Health Care Would Actually Look Like

If you have health insurance but no primary care physician, the process for getting a physical can be a bit complicated. Whether or not you get your health insurance through an employer, you'll probably have to find a practice in your area that is in your network. Then you'll have to find out if it's accepting new patients. You may have to wait months until the office will let you come in for a physical. You'll have to figure out if you're responsible for a co-pay. Even after the visit, you may need to cover the additional cost of any blood work or other tests, and you probably can't figure out how much you'll be billed for that ahead of time. At some point, you'll also have to decide whether it's worth the trouble to set up a tax-advantaged account to cover the unpredictable costs of this visit or any future ones.

Or you could just find a direct primary care doctor who's accepting new patients and pay a flat monthly fee that covers all your in-office services and tests. If you need an out-of-office test or a prescription, the practice may also give you access to steep discounts compared to what it would cost with insurance.

There are currently more than 1,400 direct primary care practices operating in 49 states. Among them are doctors Lee Gross and William Crouch at Epiphany Health Direct Primary Care in North Port, Florida. They charge just $75 a month for an adult, $30 per month for one child, and $15 a month for each additional child. After that, nothing more is owed for services provided in the office—no health insurance necessary. In January, Reason's John Osterhoudt visited Epiphany and spoke with Gross about what free market health care should, and can, look like.

Reason: What is primary care at a fundamental level?

Gross: Primary care in its most fundamental level is the most basic aspect of health care delivery in the world. It is where most people interact with the health care delivery system. It's where you do your preventative maintenance, where you go for respiratory infections, where you manage your high blood pressure, your diabetes. About 85 percent of all health care delivery in the country can be managed at a primary care level, so that is really the bulk of health care delivery in our country.

What is it that you and Dr. Crouch do at Epiphany, and how is it different from the traditional fee-for-service, insurance-based model?

When I was in the fee-for-service system, I felt like I was playing a game of Whac-A-Mole with Medicare. We had to find ways of doing as much stuff to as many people as possible to generate as much revenue just to pay for the computer systems that I needed to bill Medicare so that I could get paid. So I'd have to get more people and I'd have to hire more staff, and then I'd have to see more patients to pay more staff, and it was a snowball. Every time I found a way to generate revenue and prop up this monstrosity that we were required to build, Medicare would knock the knees out from under us and take away that revenue source. Eventually we just said, "No more."

The name of our practice is Epiphany Health, and that's a very strange name for a health care company. But we did have an epiphany, and the epiphany was "Why are we inserting so many people at the primary care level between the doctor and the patient? Why are we insuring primary care?" The more people that you insert between the doctor and patient, the more expensive it gets, the more cumbersome it gets, the more impersonal it gets. We had our epiphany about 11 years ago: Let's kick the middlemen out of this relationship. Let's have a direct relationship between the doctor and the patient, and at that point we created one of the first direct primary care practices in the country.

Now, at the time we were doing this, there were many other practices simultaneously working on this model. It has since come to be known nationally as "direct primary care," but essentially it's a membership-based primary care program. Instead of a fee for service, instead of a charge for every time the doctor touches the patient, you have a flat subscription fee, much like Netflix. Once you pay that membership fee to your primary care physician, all the services that are provided in the doctor's office are done so at no additional charge. If I see you 10 times in a month to manage a complex condition, it doesn't cost you any more, and I don't bill your insurance for every one of those interactions.

When we opened our practice in 2011, the first thing we saw was uninsured patients coming to our practice from all over Florida. We're in Southwest Florida, this is not the Mayo Clinic or the Cleveland Clinic, but patients were driving hours to access care because they could afford it. They couldn't afford an insurance policy, but they certainly could afford health care in the manner that we were providing it.

What can you do in the office? Can you give me a range of what is included in that $75-a-month fee?

Once a patient is a member of our practice, anything that we can do within the four walls of our office is included at no additional charge. That would include things like electrocardiograms (EKGs); 24-hour heart monitors or Holter monitors; minor procedures like taking off a small skin cancer. I can do biopsies and joint injections, we can remove moles and sew up lacerations. I can splint uncomplicated fractures. Most tests that we do within our office, like a strep test, urine test, or pregnancy test, those are all things that we do at no additional charge.

There is so much that can be done on a primary care level. Let's let the insurance take care of the unpredictable things. Insurance is good for the big stuff. It's not good for the little stuff. It's too complicated. What we do in direct primary care is we make the predictable things affordable for everybody. We take the stuff that you're going to need on an everyday basis and we put affordable price tags on it, and we say you don't need your insurance for this. In fact, the insurance makes it more expensive. If you can expect that in the course of your lifetime you're going to need something like this, let's just make it cheap for everyone.

We make it cheaper than a cellphone. If you can afford a cellphone, you can afford the most basic aspect of health care delivery in the United States.

And when patients need services outside your office, like a lab test?

We have negotiated wholesale prices on everything.

For example, if I do a biopsy, I don't charge you for the biopsy, but my pathologist is going to charge you $35 to tell you whether that's cancer. So I collect $35 from you and give it to the pathologist. If I send your urine specimen out for a culture, I charge $35 for that.

What we very quickly realized is that with uninsured patients, we had to find a way to get them other services outside our office that people needed on a routine primary care basis. They needed access to affordable labs, affordable imaging services, affordable physical therapy. We reached out to our local friends in the health care community, we reached out to local labs, and we said, "If I were to send a patient to you that agreed to pay you in full at the time of service for an X-ray, what could you sell me an X-ray for?" And they sold us those X-rays for pennies on the dollar.

I said, "If I were to collect the money upfront from the patient, and instead of you sending one bill to each of 500 patients, if you sent me one bill for all 500 patients, and you didn't have to worry about coding, you didn't have to worry about collecting, you didn't have to worry about filing insurance claims for every single lab that you order, what could you sell those labs for?" The most expensive thing they do is not the lab. It's the cost of the human labor associated with processing those claims and getting paid. If we eliminate their No. 1 line item expense in their service delivery, we can bring those prices way down. And that's exactly what we saw. We would see 95 percent discounts on the laboratory services.

For example, the very first patient that I enrolled in our direct primary care practice, they went to see their rheumatologist, and the rheumatologist gave them a lab order. The lab quoted them $1,800 for the blood work. The patient got on the phone and said, "Wait a second, I can't afford this. I thought I was supposed to get some sort of discount by being a member of your direct primary care practice?" We said, "Well that order has to come through us, and you have to pay us for it, because we buy labs wholesale." That patient was able to get the same exact labs at the same exact facility for $85. So with the savings on a single lab test, that patient paid for [months and months] of membership in our program.

Ideally, what should insurance pay for? 

If I were to be able to design the perfect marriage between direct primary care and the coverage that's needed for the what-ifs, the major catastrophes, I would have some high-ceiling, bare-bones policy, much like your homeowners insurance. You need your homeowners insurance if your house burns down. You don't need it to mow the lawn. Let's make the routine stuff affordable, and let's have some safety net for "What if I get cancer? What if I have a heart attack and need a bypass surgery?" That's what the insurance is ideally good for. Unfortunately, Obamacare basically made those plans -illegal.

From my understanding, most direct primary care offices have a very small administrative staff, if any at all.

The nice thing about a direct primary care practice is that your staff is not hired to interact with insurance companies. We don't have an entire billing department. We don't have a coding department. Our staff is hired for patient care. When I have a nurse, my nurse is not spending her entire day on the phone fighting for authorizations. She's not fighting for payments. She's not fighting denials. She is providing direct patient care. She's able to pick up the phone and call my patient that I saw two or three days ago and say, "Hi, this is Brittany from Epiphany Health from Dr. Gross' office. I just wanted to see how you were feeling." Where does that happen ever in the American health care system? But it happens here in our direct primary care practice.

Some direct primary care practices have no staff at all, and when you call up, guess who answers the phone? The doctor. People say, "Wait a second, I wasn't expecting to talk to the doctor. Hold on. I wasn't ready for it."

What role does telemedicine play in your business, and how does that compare to other primary care offices?

Telemedicine was critical for us, particularly during this pandemic. One of the things that we very quickly realized is that doctor's offices make their money on seeing patients in person. So if you're a fee-for-service practice, you have no choice but to bring people into your office in order to generate revenue. When this pandemic hit, patients weren't coming into the office. They were terrified to come into the office.

More than half of the primary care practices in the country almost went bankrupt. They started laying off employees. They started closing offices. You're in the middle of one of the worst health care crises in over a century and doctors are laying off health care workers and shuttering primary care doctors' offices. That's not what the direct primary care practices did, because we had the flexibility to audible and change our practice model. We flipped a switch, and instantly from an in-person practice we were an online practice. We were a parking lot practice. We were a house call practice. We did whatever we had to do in order to get the patient the proper care at the proper time.

We didn't need to wait for Blue Cross to convene a committee to pay for telemedicine services. We didn't need the county facilities to come and certify that the parking lot was a safe place to provide these fee-for-service visits. I didn't need to wait two or three months for Medicare to create a new billing code in order for me to provide technology visits for a patient, and I didn't need to determine whether or not a phone call was the same thing as a video visit, and whether FaceTime was appropriate. I just did it. We did what we had to do in order to provide the care, and that's the flexibility that's built within this model.

For what Medicare pays for a single technology visit, I provide two to three months of unlimited technology visits, unlimited office visits, unlimited home visits, unlimited email visits. So now our model is pandemic-tested. It's proven that it's a superior model because we have the built-in flexibilities to do what we need at the time we need it.

Tell me about direct primary care as a movement, for lack of a better word. Has it been growing recently?

Direct primary care is absolutely a growing movement. If you look back about 10 years ago, when we started our practice, there were probably a dozen practices like us that were all starting our own little silos. Nobody knew anybody else existed, but we all knew that the system was broken and that we weren't going to look to Washington to fix it. The cavalry was not coming from Washington to save our practices and our patients. We had to do it ourselves, and we did it. We all fixed it in our own separate ways. We started adopting best practices from these other people, started communicating how we were doing things, and before you know it a community started to form out of these practices, and started sharing ideas, and almost started preaching the gospel of what's possible.

Fast forward 10 years: There's well over 1,500 practices around the country, all individually owned and operated. We're probably seeing another practice pop up almost every single day. There are some regulatory barriers that get in the way of expanding this model. One of the major issues that we saw at the state level is if you charge a flat monthly fee for unlimited primary care services, some people might consider that an insurance product. So what we had to do was protect the practices from an insurance commissioner that might say: "You're an insurance product. We need to regulate you as an insurance product. If a patient signs up, you need to have cash reserves, and you need to use COBRA, and you need to be treated as if you were an insurance company, and you need to be licensed to sell the insurance product."

What we've effectively done the last decade is passed legislation in 29 states that says direct primary care is not a health plan. Direct primary care is not insurance. We'd like to see that legislation in all 50 states. One of the barriers that we see on the federal level is the IRS tax treatment of how this works. So the question from the IRS is: If somebody pays a membership for the promise of services, is that actually money spent on health care services, and is that tax deductible? Can you use pretax dollars to pay for those services? Can you use a health savings account?

That's been the bulk of what many of the leaders in direct primary care across the country have been working on for many, many years now. We've made some progress on that front. We did get an executive order signed in 2017 that declares that direct primary care is a tax [deductible] expense. We continue to work with the Treasury Department and the IRS on implementing that executive order. We hope to work with the Biden administration to finalize that rule. The good news is that the IRS is very supportive of the concept of direct primary care and of memberships being qualified as pretax expenses.

I saw someone claim on Twitter recently that the American health care system is run by "the ghost of Ayn Rand." Someone might say, "Look at these private insurance companies in this capitalist system making health care so expensive." Why is that not true, and how does the direct primary care model align better with free market principles? 

The myth is that profit by its mere definition does not belong in the American health care system, and it's evil, and it creates perverse incentives. While there certainly are perverse incentives in all these systems, the key to making that profit work is, again, the elimination of that third party in the middle of that profit which just drives up cost but adds no value.

Direct primary care is about as close to a free market in health care as you've ever seen in our country. People say, "We tried the free market. It didn't work. That's why we need the government to take over with a single-payer health care system." We have never had a true marketplace in health care. We have competition, but we have competition in a price-fixed system, with very opaque prices. While I was trained in Cleveland, we had the Cleveland Clinic and University Hospitals Cleveland Medical Center, two massive institutions right across the street from one another that competed aggressively to do lots of very expensive things to lots of people. But they had no incentive to compete on price. They might compete on quality, they might compete on service, but they never competed on price.

The first time I went to Washington and made a presentation on direct primary care, I gave it to a group of physicians, and after I gave my presentation on our practice and what we were doing, a doctor raised his hand and said, "You are charging $80 a month. What happens if some doctor sets up right next door to you and charges $40 a month?" I said, "That's an excellent question, because if the first question out of the audience is 'What are we going to do when we bring down the price of health care?' we're onto something. Because that question has never been asked in the American health care system ever."

I said, "That doctor and I are going to have to compete on price and quality, and I'm going to have to justify why my price is twice as much. Maybe I provide better service. Maybe I'm just better trained, have better credentials, or have more experience. But something tangible is going to have to justify that, or I'm going to have to lower my prices to compete, or I'm going to lose patients to the person down the street." Value is determined by the user of the services, which is the patient. It's not the value as determined by how many codes I can send to the third party to justify why I'm doing the things that I'm doing and that I can get certain lab results out of you or certain blood pressure readings out of you to prove that I'm a good doctor. I'm going to prove I'm a good doctor to you by how you value my services.

So if we're looking for the ideal health care system, we want to see three pillars. We want to see lower cost, better quality, and more choices. You cannot have all three of those in a government-run system. You can only have those in a free market capitalist system.

This interview has been condensed and edited for style and clarity. For a video version, visit reason.com.