October 22, 2007

The Wall Street Journal ran an article this morning ("Doctors Try Prepaid Plans") on how primary care docs are dropping out of insurance plans - both public and private - in favor of prepaid plans that offer unlimited access to basic health care for set monthly fees.

While specialists' incomes have held steady, family physicians and internists have seen their incomes shrink 10% because of flat or falling reimbursements. Over the past decade, their ranks have fallen dramatically and the number of medical students who are going into the discipline has declined by half, according to the American Academy of Family Physicians.

Prepaid plans aren't intended to replace more comprehensive coverage. Rather, physicians like Dr. Wood see them as filling an important gap in primary care. His main targets are individual patients with basic medical needs and employers who want to supplement costly, high-deductible plans.

The article could also have been titled "We're Mad as Hell and We Won't Take it Anymore." American health insurance is basically prepaid health care already, since employer-provided health insurance typically offers low-copays and deductibles for the vast majority of health care services.

But insurance companies compensate for these low usage fees by charging higher monthly premiums, squeezing doctors' fees, and policing claims ruthlessly. The outcome is a primary care system that is enormously bureaucratic and fraying at the margins.

Dr. Woods model - treating primary more care more like a gym membership - makes plenty of sense, since it focuses on inexpensive, protocol-driven care than can be offered at minimal cost while still giving patients more overall access.

What about low-income patients who might not be able to afford the $125 monthly fee? Allowing an individual tax deduction for health insurance would help make plans like this more affordable, as would giving Medicaid patients vouchers for prepaid health care, perhaps combined with a choice of catastrophic insurance plans and a basic savings account.

Who stands to lose from programs like this? Big insurance companies who don't like the competition, and speciality providers who depend on state mandates in comprehensive insurance plans (think: chiropractors) to subsidize their practices.

In any case, prepaid plans (along with retail clinics like RediClinic) are definitely a model that is worth exploring further.

Posted by Paul Howard at October 22, 2007 03:52 PM